The Ministry of Finance is seeking opinions on the draft Resolution of the National Assembly on reducing personal income tax and corporate income tax for households, individual businesses and enterprises.
In the process of contributing opinions on tax policies for business households, Ms. Le Yen - Director of Hanoi Tax Consulting Co., Ltd. (Hanoitax) - noted the "tax jump" when revenue exceeds the threshold of 1 billion VND.
According to the current calculation method mentioned by Ms. Yen, when revenue exceeds 1 billion VND, value-added tax (VAT) is calculated on the entire revenue, while personal income tax (PIT) is calculated on the portion of revenue exceeding 1 billion VND.
Experts give an example, a service business household with a revenue of 1 billion VND does not have to pay tax. However, if revenue increases by 10 million VND, to 1.01 billion VND, tax obligations change significantly.
VAT is calculated on total revenue at a rate of 5%, equivalent to 50.5 million VND (1.01 billion VND × 5%). Meanwhile, PIT is calculated at a rate of 2% on 10 million VND of revenue exceeding the threshold of 1 billion VND, equivalent to 200,000 VND. The total tax payable is 50.7 million VND.
Thus, revenue only increased by 10 million VND, but tax obligations arose to 50.7 million VND.
According to Ms. Yen, the "tax jump" at this revenue threshold may create motivation to hide revenue, subdivide operations, or make business households unwilling to develop beyond the threshold.
To overcome this, Ms. Yen proposed to only include VAT and PIT on the revenue exceeding 1 billion VND.
With the proposed calculation method, if service business households achieve revenue of 1.01 billion VND, the revenue exceeding the threshold is 10 million VND. Applying a tax rate of 7%, the tax payable will be 700,000 VND, instead of 50.7 million VND according to the calculation method mentioned by experts.
In addition, Ms. Yen believes that it is necessary to study a transition mechanism or progressive tax rates to increase tax obligations corresponding to the increase in revenue, thereby avoiding creating a tax "shock" when business households just exceed the threshold.
According to experts, this option is expected to contribute to limiting the subdivision or concealment of revenue, encouraging full declaration, and creating more time for business households to accumulate resources and improve management capacity.
The goal is not only to make revenue transparent but also to create conditions for business households to grow. It is not advisable to let the time when households have just exceeded the revenue threshold also be the time when tax obligations and compliance costs increase sharply," Ms. Yen emphasized.
