In addition to the positive results achieved, in the process of implementing the Law on Personal Income Tax (PIT), the problems have been revealed, including the tax base, taxable subjects, taxable income, tax calculation, tax-exempt income; tax calculation methods and tax rates.
In particular, for income from wages and salaries, it is also related to family deductions and other deductions as a basis for determining taxable income and classifying progressive taxes in part. These problems cause a lack of transparency and inequality in individual income regulation as well as the level and rate of regulation corresponding to other Tax Laws, especially the Law on Corporate Income Tax (CIT). That situation has caused some difficulties in managing personal income tax, and compliance is not high.
Accordingly, it is necessary to study and amend the current Law on personal income tax to overcome current shortcomings and ensure the above target requirements.
In this discussion section, I would like to focus on some taxable income items that are facing many difficulties and are not really clear in the implementation of the current Law on personal income tax and focus on income related to wages; from gifts, gifts...
According to the provisions of the current Law and guiding documents for implementation, income from wages and wages is the income that employees receive from employers. These include:
Salary, wages and items of salary nature, recognized as such in the form of money or not in money. Bonuses in various forms; allowances and subsidies, except for allowances and subsidies according to the provisions of law that are not subject to tax;
Compensation received in the following forms: Brokerage commissions, fees for participating in topics, projects, penny fees and other commissions and remunerations;
Money received from participating in business associations, board of directors, control boards, management boards, associations, professional associations, and other organizations...
Other benefits as prescribed by law...
This regulation is not really equal and clear. For example, bonuses paid by enterprises, organizations... to employees under the management unit in the form of money and in kind are subject to income tax from wages and salaries (TLTC).
However, bonuses, gifts, gifts in money, in kind (except for gifts of securities, capital in economic organizations, business establishments, real estate and other assets that must be registered for ownership or registered for use) for individuals outside the enterprise, outside the paying unit are not subject to personal income tax. Similarly, income from teaching participation, profit from writing... is subject to tax but bonuses, gifts of money, foreign currency... for individuals other than businesses and organizations are not subject to tax.
For the amount of brokerage commissions for individuals with very different regulatory policies: subjects who do not register for business must pay tax according to the progressive tax form prescribed for income from wages from 5% to 35%; Business individuals, those who register for business and register to pay taxes by household or individual must pay 7% of the actual received tax on the commission. For individuals who directly sign contracts as insurance agents, lottery agents, or multi-level sales agents, the personal income tax rate is only 5% on the commission received...
Other benefits as prescribed by law also face many difficulties in determining non-taxable or taxable income: Housing, electricity and water; lunch, clothing, work expenses, welfare expenses, welfare; medical, cultural and sports expenses; other unclear expenses.
General welfare expenses for collective employees are not subject to tax, but expenses for each individual will be subject to personal income tax: expenses for renting premises, equipment, coaches for physical activities, sports, yoga... If recorded for collective, the tax will not be paid, if the individual is under personal income tax... That fact leads to tax evasion.
Regarding personal income tax from wages and salaries, what people are most interested in is the level of personal income tax regulation, which is the family deduction tax (GTGC) and the progressive tax table for each portion above taxable income with 7 levels, tax rate from 5% to 35%.
Taxable income for income from wages and wages is the total taxable income minus contributions to social insurance, health insurance, unemployment insurance, and occupational liability insurance for a number of sectors and occupations that must participate in compulsory insurance, voluntary pension funds, deductions for charitable and humanitarian contributions and family deductions for taxpayers themselves and dependents that taxpayers are responsible for nurturing according to the provisions of law.
First of all, it is about the family deduction for taxpayers and dependents that taxpayers are responsible for nurturing.
Personal Law No. 04/2007/QH12 applied from January 1, 2009 stipulates: The deduction for taxpayers is 4 million VND/month (48 million VND/year); for each dependent is 1.6 million VND/month.
Law on personal income tax No. 26/2012/QH13 amends, the GTGC for taxpayers is increased to VND9 million/month, VND108 million/year) for each dependent is VND3.6 million/month; The criteria for the income level as a basis for determining the dependent to be subject to deduction are the average monthly income in the year from all income sources not exceeding VND1,000,000.
At the same time, Law No. 26/2012/QH13 adds the following content: in case the consumer price index (CPI) fluctuates over 20% compared to July 1, 2012 or the most recent adjustment of the GTGC level, the Government shall submit to the National Assembly Standing Committee to adjust the GTGC level in accordance with price fluctuations to apply for the next tax calculation period.
Resolution No. 954/2020/UBTVQH14 has adjusted the family deduction for taxpayers to VND11 million/month (VND132 million/year); for each dependent, it is VND4.4 million/month, which has been 4 years.
During the implementation of determining that dependents are subject to a deduction of the average monthly income for the year from all income sources not exceeding 1 million VND, there is almost no gap in taxable income management, the feasibility and effectiveness of the Law is not high.
Because the tax authority does not have a basis to determine how much the dependent's income is from business, from savings deposits, stock investment, capital investment... on the other hand, it is very unreasonable to determine an income of over 1 million VND without deductions. Because if the dependent does not have an income, or an income of VND 1 million or less, the GTGC will be VND 4.4 million/month, but if the dependent has an income of VND 1.1 million/month, it will not be deducted.
This amendment has many opinions to adjust the family deduction level to ensure the standard of living for taxpayers and dependents who then pay personal income tax. In our opinion, we should explain more clearly the GTGC level, the determination of income levels as a basis for deductions of dependents and taxpayers to have an appropriate adjustment level and improve feasibility. Raising the GTGC level to suit the socio-economic development situation, price index in each specific period as well as future development trends, in order to reduce tax regulation for taxpayers; especially taxpayers with low income is necessary.
However, it is necessary to clearly understand that the GTGC is not a level to ensure the real life of taxpayers, but is usually calculated on the factor of GDP per capita, minimum wage, to meet the essential needs of life... in accordance with the specific conditions in each historical period and the characteristics of the countries and territories.
The family deduction level is to determine the taxable income level along with the deductions for compulsory social insurance contributions, charity contributions, and humanitarian contributions. After deducting the remaining income, personal income tax will be paid according to the progressive tax table in installments. The remaining income after paying personal income tax plus the new GTGC is the employee's expenditure.
In some advanced countries, the GTGC is deducted from the actual expenses with invoices and documents on healthcare, education, etc. In this case, taxable income is calculated for the first-time earnings not specified in the GTGC threshold for dependents and dependents.
In Vietnam, income and expenses for education and health care are very different: Tuition fees for public and private schools, international schools, study abroad; medical examination and treatment are similar... Accordingly, the issue of GTGC according to actual expenditure is also difficult, so we should lean towards the GTGC option according to the mechanism for calculating income for individuals and dependents, regardless of region or profession of the individual that generates income.
To suit the reality of our country, it is necessary to study and adjust the GTGC level for taxpayers and NPTs to suit the economic growth rate, average income of society, salary regime changes according to Government regulations...
However, adjusting from 11 million VND, 4.4 million VND is appropriate, it is necessary to synchronously study the indicators of average GDP income, regional income, essential spending needs for life, price fluctuation index... to come up with a GTGC level in accordance with the criteria for personal income tax on the basis of expanding the tax base and reducing the appropriate tax regulation level, even for some industries and fields that need to be encouraged to attract human resources.
Regarding personal income tax declaration from wages
Currently, the progressive tax rate is applied partially to income from salaries and wages with 7 tax levels: 5%, 10%, 15%, 20%, 25%, 30% and 35%. The application of partial progressive tax rates for personal income tax is to ensure reasonableness and fairness in income regulation, people with higher income will have a higher regulation rate. However, the current progressive tax rate is unreasonable due to the narrow gap between levels, leading to people with high incomes being regulated quite a lot of tax.
Normally, corporate income tax (CIT) and personal income tax are regulated at the same level, but according to current law, corporate income tax has a basic tax rate of 20%, in addition to preferential tax rates, tax exemptions of 5%, 7%, 10%, 15% ...
However, the highest personal income tax rate is 35%, there are no tax incentives for the production and business sector that needs to attract human resources, especially high-quality human resources. That situation leads to individuals paying a total tax of over 30% of their taxable income, in addition, there is no preferential corporate income tax policy for people working in industries that need incentives similar to the preferential treatment for investment areas and investment fields of corporate income tax.
Under current law, taxable income is up to 5 million VND/month with a tax rate of 5%; but over 5 million VND to 10 million VND with a tax rate of 10%... over 80 million VND with a tax rate of 35%. By simply changing the income to 10 million VND or 15 million VND to pay 5% tax, this subject has reduced the personal income tax regulation by more than 50% compared to the current level.
Accordingly, it is necessary to study and combine raising the GTGC level with extending the gap between tax levels, studying the removal of the tax rate of 35%; study tax reduction for some areas that need to be encouraged and attract high-quality human resources to ensure that people with different incomes are reduced in tax regulation, ensuring equality in both chieuits and vertices of personal income tax.
The issue of determining dependents with an income of over 1 million VND per month on average in the year also needs to be considered for change with the current situation of personal income tax management and fair and equal tax regulation policies, encouraging workers to increase income.
Along with adjusting the GTGC level, the partial progressive tax table, the preferential policy needs to detail taxable income from wages to ensure clarity and transparency. Especially tangible income, benefits enjoyed, similarities between income from wages and other income, between personal income tax and other taxes.
At the same time, it is regulated that tax collection methods, avoiding the current situation, personal income tax is temporarily collected monthly, settled annually; in the first months of the year, high income from 13th month salary, bonus, Tet... must pay tax immediately but not until the end of the first quarter of the year12 months) when settling taxes, the tax will be deducted for the whole year, causing disadvantages for taxpayers.
In addition to personal income tax from salaries and wages, it is necessary to synchronously study other taxable incomes according to the provisions of the current Tax Law. This includes expanding income subject to gift-to-gift tax, inheriting other incomes, including income in cash, other high-value assets to overturn the regulation target of personal income tax.
