In recent days, many business households have continuously reported the proposal to apply a taxable revenue threshold of VND200 million/year. They said that this level is too low compared to the cost of premises, goods, labor and living.
Regarding this content, Lao Dong Newspaper reporters had an interview with Ms. Le Yen - Chairman of the Board of Directors, concurrently General Director of Hanoi Tax Consulting Company Limited (HanoiTax).
Sir, many business households are currently reacting that the revenue of 200 million VND/year to start paying tax is too low compared to reality. How do you evaluate this threshold?
- In fact, anyone who is a businessman can see a very clear thing, with a revenue of 200 million VND/year, almost no business household can maintain operations. If divided this figure by 12 months, each month will only reach about 16-17 million VND in revenue. This figure shows that it is not suitable for any real business model.
Almost no business line today can maintain such a revenue. The cost of renting a premises alone can exceed 16 million VND/month, not to mention the cost of labor, goods, electricity, water, transportation, management, software, etc. Revenue of 16 million VND/month is basically not enough to cover the minimum cost of a household having to support their family by selling goods, so this level is completely unreasonable. A business household cannot survive at this threshold.
I have repeatedly commented on the proposal to tax from 200 million VND/year, which does not accurately reflect market reality, is not associated with living expenses, business expenses that are increasing sharply and is not ensuring fairness among target groups.
So, in your opinion, if we consider the minimum living standard and fair factor, what should be the reasonable tax revenue threshold?
- If we consider it fairly, we must start from the minimum income of workers. According to the new regulations, employees are exempt from personal income tax if their income is below about VND15.5 million/month after calculating family deductions. That is, 15.5 million VND/month is the minimum income for a worker to start paying tax.
So, how much revenue does a business household need to have to generate to create 15.5 million VND in income? This depends on the profit margin of each industry, but in general, many small business sectors, especially grocery and consumer goods sales, only have an average profit margin of 5-10%, many items only have 3-8%. If they take an average of 8-10% of the gross profit, to "take" 15 million VND in real profit, their monthly revenue must be about 200 million VND/month.
In other words, to have a minimum income of 15 million/month, annual revenue must reach about 1.8-2.4 billion VND. This is a simple calculation but very close to reality.
Of course, the State cannot increase the tax exemption threshold to a few billion VND, but at the minimum to reflect the actual standard of living and cost, the taxable revenue threshold should be from 500 million to 1 billion VND/year to avoid creating too much pressure for small groups of households, which are extremely sensitive to costs.
Some opinions say that if the revenue threshold is raised, the group of individuals with rental assets (rental houses, rental cars, etc.) will benefit too much and will not ensure fairness. What is your opinion on this issue?
- I think this is the point that has caused problems for a long time. The group of individuals renting houses, cars or rental assets in general is also exempt from tax if the revenue is under 200 million VND/year. However, compared to the group of small business households, these two groups are completely different.
Most of the tenants have owned valuable assets. As for small business households, their main income is almost the money they earn from selling every day. If the two groups are combined at the same threshold, it will lead to great injustice.
However, because the policy has not yet separated the two groups, when considering raising the threshold, the drafting agency encountered difficulties. If the threshold is raised to 500-800 million VND/year, the group with a rental house will also benefit. This is why the issued level is still kept at 200 million VND/year, although not close to reality.
If small businesses are separated from those that lend assets, the tax exemption for business households can be completely increased and will not affect the remaining group.
If a small business household only achieves a revenue of nearly 200 million VND/year, or about 15-16 million/month, how much profit will they really "take home"?
- We must understand the two concepts correctly: Gross profit and real profit. With a revenue of VND 200 million/year, if taking the gross profit of 8-10% (this is the common profit of the grocery industry - a very large group among contract households), the gross profit is only about VND 16-20 million/year. That means people only have 1.3-1.2 million VND left each month. It should be noted that this is only gross profit, not including any expenses.
After deducting electricity and water costs, depreciation, software, operations and many other small expenses, the actual figure is almost 0, even negative. That is why it is said that in reality, there are almost no households with a revenue of less than 200 million VND/year that can still maintain business. If there are only households selling at home, doing everything themselves, " Taking advantage of labor", but this interest rate is also very low.
So, in your opinion, what is the most feasible solution at present?
- First of all, it is necessary to adjust the revenue threshold to a level that accurately reflects the market reality and living expenses. 200 million VND/year is no longer suitable. The reasonable level must be around 500-800 million VND, or even higher, it can be up to 1 billion VND depending on the industry.
Second, the policy needs to clearly separate two groups of subjects: Real business households and individuals leasing assets. These two groups cannot apply the same threshold, because the economic nature is completely different.
If the tax authority's goal is to improve compliance, reduce risks, and put business households under transparent management, the revenue threshold must be "easy to breathe" enough for people to be able to change the model without being under too much pressure.
Sincerely thank you!
