The consumer price index (CPI) has increased by 22 percent compared with July 2013, when the 2012 amended PIT Law took effect. However, the taxation threshold remains unchanged.
Experts have once again urged amending the PIT Law, saying that the out-of-date law is discouraging talents and affecting the nation’s competitiveness.
The issue of amending the law was put forward after some workers complained that they have to pay high PIT for the 13th-month salary they received.
Hoang Lam, 40, in Hanoi said he got VND100 million in bonus as the 13th-month salary of 2019 for his excellent achievements. However, he had to pay VND25 million in PIT.
Under the 2012 PIT Law, taxable income comprises salary, wage and other income items. Allowances and bonuses are also taxed. Tet bonuses are also taxed based on the partial progressive tariff like salaries, with seven rates, from 5 percent to 35 percent.
|As for the 13th-month salary, the laws don’t mention this salary and it is considered a kind of bonus that enterprises offer to workers under agreements between employers and employees in labor contracts.|
As for the 13th-month salary, the laws don’t mention this salary and it is considered a kind of bonus that enterprises offer to workers under agreements between employers and employees in labor contracts.
If enterprises pay the 13th-month salary together with Tet bonus, the PIT amounts workers have to pay will be higher. Therefore, enterprises tend to pay the amounts of money separately.
The regulation on deductions for family circumstances, VND9 million for one taxpayer and VND3.6 million for every dependent individual, is also applied to income from Tet bonus.
For example, the workers who receive VND20 million in Tet bonus and don’t have dependent family members, will have taxable income of VND12 million. Of this, the first VND5 million will be taxed 5 percent, the next VND5 million will be taxed 10 percent and the remaining VND2 million will be taxed 15 percent.
Economists have many times urged to adjust the taxation threshold and the deduction levels. However, no adjustment has been made.
Under the current laws, when the CPI increases by more than 20 percent compared with July 2013, the regulation on deductions for family circumstances will be adjusted. From July 2013 to the end of 2019, the CPI increased by more than 22 percent. However, the PIT law remains unchanged.
The collection from PIT accounts for a big proportion of the annual total collection from taxes. Of the total tax collection of VND1,276,219 billion in 2019, the revenue from PIT was VND98 trillion, twice as much as the revenue from crude oil.
The revenue from PIT has been increasing sharply in the last 10 years. In 2010, Vietnam collected VND26 trillion from PIT, while the figure rose to VND100 trillion in 2019.
Under the current PIT law, pho sellers and taxi motorbike taxi drivers have to pay tax.
The Ministry of Finance (MOF) says that personal income tax (PIT) rates have become out of date after six years of application and need amendment.