The HCM City Tax Agency has recently filed its feedback on the draft for a new tax law developed by the Ministry of Finance, suggesting that the personal income tax threshold be hiked to VND9 million (US$432) a month.
The figure is much higher thanthe rate set by the bill, set to take effect as of 2014, which is only VND6 million a month, an amount that has ignited a wave of objections from tax payers.
Currently, the deduction for taxpayers is VND4 million a month.
“The VND9 million threshold will receive consensus from society,” the municipal tax agency said.
The agency said the deduction calculation is based on basic wage and GDP per capita.
Under the current tax law, the deduction for taxpayer is six times higher than the basic wage. Hence, given the expected basic wage in 2014, the rate must be VND9.9 million a month.
As for GDP capita, the threshold is currently set to be 2.5 times of the current figure. The threshold in 2014 thus must be around VND8.9 – 9.1 million a month, since GDP per capita is expected to reach $1,811-1,843 a year, or VND3.5 – 3.7 million a month.
Reducing tax rates
In its feedback document, the HCM City Tax Agency also proposed cutting the tax rate at the first level of the tax ladder to 3 percent, down from the current 5 percent.
“Since taxpayers at the first level account for 73 percent of the total figure, we should slash the rate at this stage to attract their consensus,” the agency explained.
The cut will only reduce the total budget collection by VND700 billion ($33.6 million), it said, adding that this is not a big sum.
“The state budget can recoup the loss by strengthening the compliance of the remaining 27 percent of high-income taxpayers.”
Under current tax laws, level 1 for taxpayers includes tSTC wSTC average monthly income is between VND1 million and VND5 million. The tax rate for this level is 5 percent.
Meanwhile, tSTC with income from more than VND5 million to VND10 million are subject to level 2, with a 10-percent tax rate, and so on.