The Ministry of Finance has suggested the government increase the personal income tax threshold to VND9 million a month, up from the earlier proposed VND6 million.
Speaking at a press briefing on the government’s regular monthly meeting on Tuesday, deputy minister of Finance Vu Thi Mai said a major upward revision of the tax-free income level has been proposed amid the current economic slump that has affected people’s incomes and sent consumption spiralling down.
The revised law on personal income tax is expected to be introduced in July 2013, six months earlier than earlier scheduled. The proposed amendments to the law also include significant adjustments involving deductions for dependents.
Along with the higher threshold for taxpayers, the deduction for dependents will also rise to VND3.6 million a month from the current VND1.6 million. Earlier, in the draft law the ministry prepared in March, the taxable threshold and deduction for dependents were expected to be lifted to VND6 million and VND2.4 million compared to the current VND4 million and VND1.6 million respectively.
Besides, the revised law will provide open regulations, which means the government can ask the National Assembly Standing Committee for permission to revise deductions for dependents if there is a 20 percent rise in consumer prices.
Revisions will be based on criteria such as gross domestic product growth, GDP per capita, consumer price index, salary improvement projects, people’s living standards and income statistics. The government will also adjust deductions by consulting the public.
The draft law may be passed at the National Assembly session at the end of this year after it gets the go-ahead from the government.
According to the ministry, around 70 percent of 3.8 million taxpayers will be exempted from the personal income tax with the newly revised tax law coming into force. The law will also send State budget revenues dipping by VND5.2 trillion in 2013 and VND13.3 trillion in 2014.
The law on personal income tax has been in place since 2009. However, the current income-tax threshold and the deduction rate for dependents have become outdated given strong price hikes over the past two years.