The latest announcement by the General Statistics Office says that the inflation rate reached 15.96% in the first five months of the year over December 2007. The high inflation has led people to propose that the tax rates and exemption levels be adjusted.

Nguyen Thi Cuc, former Deputy General Director of the General Taxation Department, now Chairwoman of the Tax Consultancy Council: There is no need to adjust tax rates

What is your viewpoint about the proposal to adjust personal income tax (PIT) in the context of sharp price increases?

Under the Ordinance on High Income Earners Taxation, when market prices go up and down by more than 20%, the government submits to the National Assembly proposals to adjust personal income tax rates. The adjustments are listed in the National Assembly’s programme to build up laws and ordinances. However, as far as I know, the National Assembly’s programme this year does not include the issue. Meanwhile, the ordinance will only be valid until the end of this year, when we begin applying the Personal Income Tax Law.

Do you think that we need to adjust the Personal Income Tax Law before the law comes into effect?

I think that we need to consider adjusting the tax rates if we apply the Ordinance on High Income Earners Taxation, while we don’t need to do that for the Personal Income Tax Law.

Why?

According to the Personal Income Tax Law, the threshold for PIT is VND5mil/month, and the tax rate is 5%, which proves to be a popular tax rate being applied in many countries in the world. The highest tax rate of 35% for income of over VND80mil/month is also a low average tax rate if compared to other regional countries. As such, Vietnam’s PIT rates prove to be suitable.

Some experts say that the exemption level of VND4mil/month per taxpayer is too small compared to the current prices of commodities. What would you say about that?

The stipulated exemption rate is the highest in the region. I have to remind you that the exemption amounts do not mean that the amounts are enough to ensure the normal lives of taxpayers. People should understand that the exemption amount is the amount of money which can be deducted before calculating tax. Therefore, there is no need to adjust the exemption levels even when prices go up and down.

Let me give an example. A taxpayer who has the monthly income of VND10mil and two dependent children will have the exemption amounts of VND4mil for himself, VND3.2mil for the children (VND1.6mil/dependent child), i.e. the taxable income is VND2.8mil. He will have to pay the tax of VND140,000 (5% of VND2.8mil) and so he has VND9,860,000 to live on (not VND4mil and VND3.2mil).

VND140,000 proves to be much lower than the tax amount the taxpayer has to pay in accordance with the currently applied Ordinance on High Income Earners Taxation. Under the ordinance, he has to pay VND500,000 in tax (whether he is single or has two dependent children).

Deputy Chairman of the National Assembly Nguyen Duc Kien: There will be no adjustment until the Personal Income Tax Law comes into effect

I know that the government discussed the reconsideration of the Ordinance on High Income Earners Taxation, but concluded that there will be no adjustment, because we will apply the Personal Income Tax Law on January 1, 2009.

I also think that we would be better off applying the Ordinance on High Income Earners Taxation until the Law goes into effect.

Source: Tuoi tre