According to current regulations in the Law on Personal Income Tax, Income from Salary and wages, the partial progressive tax table is applied with 7 tax levels from 5% to 35%.
However, the Ministry of Finance assesses that the current tax table has many limitations, notably the large number of steps and the gap between narrow steps, leading to the risk of "jumping steps" when synthesizing year-end income, increasing the amount of tax payable.
Based on reviewing international practices and trends, in the Draft Law on Personal Income Tax Amendment, the Ministry of Finance proposed two amended options, both in the direction of reducing the tax table to 5 levels and extending the income calculation method between levels.
Both options keep the minimum tax rate of 5% for taxable income up to 10 million VND/month. The highest tax rate is 35%, applied to income over 80 million VND/month (option 1) and over 100 million VND/month (option 2).
According to the Ministry of Finance, adjusting the tax table according to option 1 does not affect taxpayers at level 1. With the adjustment of the family deduction level, low-income individuals will also receive a tax reduction. Taxpayers with a tax rate of 2 or higher will also have their tax obligations reduced compared to the current tax rate.
For example, people with a taxable income of VND10 million/month will have about VND250,000 in tax per month; people with an income of VND30 million/month will have a reduction of VND850,000/month; and at VND40 million/month, the tax will be reduced to about VND750,000/month.
Meanwhile, option 2 is more beneficial for people with an income of VND50 million/month or more, due to the wider spread at higher levels. However, according to the Ministry's assessment, this option will reduce state budget revenue more than option 1.
The Ministry of Finance affirmed that the application of the progressive tax rate in part is a popular practice in the world. However, the current trend in many countries is to simplify the tax table by reducing the number of tax rates and adjusting tax rates in accordance with income.
