On the afternoon of April 21, at the first session of the 16th National Assembly, Minister of Finance Ngo Van Tuan presented a report on the draft Law amending tax laws, which proposed adjusting the threshold of revenue not subject to tax for households and individual businesses to support in the context of increased costs and reduced purchasing power. The draft does not specify the threshold level but assigns it to the Government to decide (currently 500 million VND/year).
Talking to Lao Dong Newspaper, Mr. Le Van Tuan - Director of Keytas Tax Accounting Co., Ltd. - shared his views on adjusting the tax exemption revenue threshold to ensure fairness and support business households.
The Ministry of Finance is submitting amendments to tax laws, including a proposal to raise the tax exemption revenue threshold. According to you, in what direction should this policy be designed to both support business households and ensure fairness?
- The tax-exempt revenue threshold for business households should be applied to both group 2 and group 3 business households, i.e., applied to business households with revenue below 50 billion VND.
Considering the principle of applying the current tax policy, the tax obligations of business households include value-added tax and personal income tax, in which, value-added tax obligations are only taxed as a percentage of revenue.
Therefore, for the tax-exempt revenue threshold of business households, we should apply tax calculation to the portion of revenue exceeding the threshold and apply it to both types of taxes.
Or more precisely, the tax-exempt revenue threshold for business households should be applied at 1 billion VND, only calculating the excess tax and applying both types of taxes; at the same time, the 1 billion VND threshold should be applied to the entire group of business households with revenue below 50 billion VND.
The threshold of 1 billion VND is also synchronized with the invoice issuance threshold being applied. This helps achieve the synchronization of tax policies. Policy synchronization will create a simple tax policy, achieve tax collection efficiency and fairness in fulfilling tax obligations. At the same time, effectively implement the State's support policies.
What basis should be used to determine the tax-exempt revenue threshold to ensure it is consistent with reality?
- First, the cost of complying with tax policies. The State is promoting electronic invoices, making the economy transparent, and above all, business households themselves must bear the cost of complying with this tax policy. Therefore, the tax threshold must also consider this factor, to help business households have more resources to implement tax policy compliance.
Because the cost to equip cash register equipment, accounting software, electronic invoices, digital signatures... is an initial investment that is not small compared to the scale of business households. Currently, the full package of these items is about 15 - 20 million VND, not including annual maintenance costs.
Second, the encouragement of the State in a harsh and risky business environment. Up to 90-95% of startups suffer losses and disappear after 3 years of starting business. This shows the harshness of business. For business households that pay taxes as a percentage of revenue, they have to bear all tax obligations even if their business results are loss-making.
In terms of tax obligations, this is clearly unfair to business households. Therefore, the tax threshold for business households needs to be considered this factor, so that people can see the State's companionship in the startup process.
Third, fairness for people with income from salaries and wages. We need not only to improve the business environment, but tax policies need the companionship and support of the State. Because, people with income from salaries and wages do not have to bear any risks, contrary to the business environment that business households face.
Not to mention, the tax-exempt revenue threshold of 500 million VND does not necessarily create after-tax income for business households equivalent to after-tax income for people with income from salaries and wages, while spending on life is the same among all subjects.
Fourth, fairness between households and individuals doing business below and above the tax threshold. Applying the tax exemption threshold of 1 billion VND, only calculating the excess tax and applying both types of taxes helps create fairness for households and individuals doing business below and above the tax threshold.
If only the excess tax is applied to personal income tax and not to value-added tax, it will create negativity in the implementation of tax policies, increasing compliance costs as well as reducing the honesty and willingness of people.
Fifth, compare with some countries with similar GDP per capita. If compared to Thailand, the tax-free revenue should be considered at 750 million VND (while the current proposal is 500 million VND). Compared to Malaysia, it is about 1 billion VND, and China is about 1.5 billion VND.
Thus, Vietnam's support level for businesses is currently lower than neighboring countries. The purpose of tax policy is not only to collect small tax money, but also to support and nurture revenue sources in the long term, when taxpayers expand their business operations and make greater contributions to the budget.
