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Vietnam's proposed increase in minimum taxable income ‘thoughtless’

Wyślij Print Pobierz added: Hanh Ngan | 2020-03-04 09:39:22
vietnam, tax, income

The Finance Ministry's proposed threshold of VND11 million ($475) as minimum taxable income to be too low, experts say.

Rau-1583237523-9747-1583237559680x408Fruits are displayed for sale at a market in Hanoi. Photo by Reuters/Kham.

Several experts have even described it as "thoughtless and outdated" for the present day.

In its recent proposal, the Ministry of Finance suggested raising the minimum taxable personal income from VND9 million ($389) per month to VND11 million ($476) per month, while the tax reduction for each of the taxpayer's dependents would also be increased from VND3.6 million ($156) per month to VND4.4 million ($190) per month.

These proposed values were calculated based on data provided by the General Statistics Office, which showed that the Consumer Price Index (CPI) had increased by 23.2 percent between July 2013 and December last year.

Under the current law, a working person with one dependent would be exempt from paying taxes if their personal income is under VND12.6 million ($545) per month.

Many experts have found the proposed values too low and unreasonable. Associate Professor Nguyen Khac Quoc Bao, head of the HCMC University of Economics' finance department, pointed out that the finance ministry has simply multiplied the old value of VND9 million by the 23-percent increase in CPI between 2013 and 2019 to reach the new suggested threshold of VND11 million.

"This method is simple to the point of being cold and thoughtless," Bao said, highlighting that this policy, which would affect the livelihoods of over 90 million people, had been calculated and planned in a way that was even simpler than a statistical problem for first year students.

"And yet the finance ministry wants the people's standard of living to stagnate, or even go backward, and after 10 years the fruits of economic growth did not enter people's lives," he said, criticizing the ministry of only focusing on maximizing the amount of tax collected and violating the principle of fostering revenue streams.

Bao therefore suggested that instead of using the CPI growth rate, the country's GDP growth rate should be used to adjust the taxable income level as it reflects the growth rate of per capita income.

He said the minimum taxable personal income should be adjusted yearly to better reflect reality.

Other experts have also said that the finance ministry’s proposal is inappropriate. Nguyen Van Hau, chairman of the Vietnam Lawyers' Commercial Arbitration Center (VLCAC), argued that under current regulations, the minimum taxable income and tax reduction for dependents would only be adjusted when the CPI growth exceeds 20 percent. He said a long-term perspective was lacking in the new proposal.

Furthermore, with the entire economy heavily affected by the novel coronavirus epidemic, people's current income cannot be used to calculate the income tax threshold values for this year and the upcoming years.

"This new proposal is yet to be applied, but it already seems too outdated and inappropriate. Taxpayers will be the ones to suffer. This needs to be recalculated and rationalized so that it does not have to be amended over and over," Hau said.