Online newspaper Vietnamnet talked with Pham Chi Lan, member of the prime ministerial Research Team and Tran Quang Thang, Head of the Institute for Management and Economy about the proposed personal income tax bill that would, if approved, start taxing anyone with a taxable income from just US$62 a month.
Pham Chi Lan:
“I do not agree with the taxation plan proposed by the Ministry of Finance (MoF). Currently, only those with an income of five million dong and more, have to pay income tax. I think that even the five million dong threshold is not suitable, because it is quite low given the current conditions”.
“Lowering the threshold for income tax to even three million dong a month will limit public purchasing power. Lower income levels caused by higher taxes will discourage investors from business or injecting money in production, thus holding back economic development. With such a taxation policy, people will have no chance to purchasing houses and vehicles, and improve their lives”.
Tran Quang Thang: “This move will make the government unpopular with the people if it is approved. Currently, those earning income of 3-4 million dong a month enjoy preferential policies for purchasing houses as ‘low income earners’. However, under the new taxation plan, they will be referred to as ‘high-income earners’, because they have to pay income tax.
MoF aims to collect as much tax as possible
Do you think that MoF’s plan aims at collecting as much tax as possible to offset reductions to be seen when Vietnam joins the WTO and has to lower import tariffs?
Pham Chi Lan: It would be better if the MoF concentrated on collection of other taxes, including corporate taxes or import taxes, instead of lowering the income tax threshold.
Wrongdoings in tax payment and collection occur everywhere. Business evade taxes, while tax collectors collude with taxpayers to pocket state money.
I think if the state can control its spending, it will be able to ensure the state budget balance, while there will be no need to collect more taxes. The state has been concentrating on tax collection, while not paying appropriate attention to spending control, thus wasting money.
The tendency now popular in the world is lowering the receipts from citizens, while still ensuring government’s expenses by controlling spending and stimulating the national economy.
Tran Quang Thang:
Instead of lowering the threshold for PIT, the government should think of other measures to improve the collection, such as stimulating the real estate market or imposing tax on land assignment. In order to economise spending, the state should call for more investment from the private sector in big projects. The State should think of collecting more from enterprises (in order to reach that goal, the state should encourage the development of the private sector), rather than trying to collect from poor people.
Higher taxes will place a heavy burden on enterprises
Do you know the actual reasons for the Ministry of Finance decided to lower the threshold for income tax?
Pham Chi Lan: The MoF argues that income tax should apply on everybody who has taxable income to be fair. However, I think the argument is true only in other countries, which have average incomes higher than in Vietnam. Other countries did not tax low income earners when they were underdeveloped nations. Only when the average income is higher do the countries tax every individual.
If the proposed taxation scheme is implemented, anyone who works will have to pay income tax
The government should expand the income tax only when the average income per capita reaches US$1,500-2,000.
Tran Quang Thang:
The Minister of Finance has to explain the ministry’s proposed plan so that the people can understand and contribute their opinions.
How will the proposed taxation plan affect the operation of local enterprises?
Three million dong a month is what most low-level business managers earn or those that have just graduated from university. If the state imposes tax on them, they will ask the enterprises to pay a higher salary, which means a heavier burden will be put on the shoulders of their employers. It is clear that with heavier financial burdens, these enterprises will find it more difficult to survive competition when Vietnam joins the WTO and fully integrates into the world.