The Ministry of Finance has recommended to the government to increase the income-tax threshold to 5 million dong (US$240) per month from the current 4 million dong.
It requires to be approved by the National Assembly which convenes next in July.
The law also allows a deduction of 1.6 million dong a month each for up to two dependants.
Out of the 7 million income-tax payers in the country, more than 200,000 are in the lowest income bracket of 4 million dong which is subject to a tax of 5 percent.
Thus, if the ministry’s proposal is approved, it will mean a loss of tax revenue of nearly 3 trillion dong ($143.5 million).
The proposal will partly mitigate the “irrationality” of the tax law and ease the burden caused by inflation, the ministry said.
There have been complaints for long that the tax threshold is too low, especially in the context of prices that have been galloping for the last few years, a point conceded by the ministry.
But for many the ministry’s action is too little too late.
The new threshold too is very low, Vu Quang Hai, a member of the NA Law Committee, said. “Although a little is better than nothing, I think the ministry should have come up with a better proposal.”
“In my opinion, the taxable income threshold should be 8 million dong ($383), or 10 times the minimum wage.”
Economist Pham Chi Lan said the proposal is a positive move towards amending the Law on Personal Income Tax but the new taxable income threshold shows the ministry has still not listened to taxpayers.
“How can the ministry advocate a threshold of 5 million dong when prices have risen so much, especially in the last few months?”
She too demanded an increase to 8 million dong.
Dr Le Dang Doanh, a senior economic advisor to the Ministry of Planning and Investment, said the ministry has responded too late to developments in the economy.
The ministry’s response was too “weak” given that prices have shot up, seriously affection people.
This month’s CPI is estimated at 3.16 percent, he said.
Many other countries with lower price rises than Vietnam have already raised income-tax thresholds to help their citizens, he added.