The Ministry of Finance is considering revising the Personal Income Tax Law to help people cope with high inflation but not until 2014 will the amended law take effect.

The ministry said the Government would submit this draft law to the National Assembly (NA) in October this year to start taking effect in early 2014.

Particularly, the ministry proposed raising the monthly deduction for taxpayers from VND4 million to VND6 million and that for each dependent from VND1.6 million to VND2.4 million.

Deputy finance minister Vu Thi Mai told the press briefing on Thursday in Hanoi: “The reality requires the State to share the burden with taxpayers through increasing family deductions.”

The Personal Income Tax Law was passed by the National Assembly (NA) in 2007 and became effective in 2009. Since then, goods and services prices have risen sharply due to the global economic crisis, adversely affecting the living conditions of taxpayers.

There are current seven personal income tax thresholds, with the lowest being 5% levied on earners of VND5 million per month and the highest of 35% on monthly earnings higher than VND80 million.

The ministry informed over 73% of the taxpayers belong to the first tax threshold, but their payments only account for 10% of the total tax collection. Meanwhile, only 0.18% are subject to the seventh threshold, but their payments make up as much as 17%.

Under the draft of the amended law, about 70% of the taxpayers under the first threshold will be tax-exempt, while 70% of those in the second tier will be moved up to the first one and the similar reclassification will occur to higher tax brackets. As a result, tax revenue will slip by VND8.15 trillion.

The finance ministry estimated the State budget revenue will gain some VND52 trillion from taxable salaries and VND4 trillion from taxable business revenues in 2014. The number of taxpayers will be 4.86 million people, 5.5% of the population, with some 20% of them to be granted tax codes in 2014.

Over 15 million individual taxpayers have been issued tax codes since the law came into force three years ago, including only 1.3 million salaried workers, or 10.2%, and 194,000 business households, 6%.

Personal income tax revenue has steadily grown over the years, with last year’s revenue surging by 41.3% against 2010, contributing to 5.5% of the State budget revenue.

SGT