In the context of a sharp increase in prices personal income tax in Vietnam needs to be changed, personal income tax in Vietnam needs to be changed, personal income tax in Vietnam, personal income tax,

In the context of a sharp increase in prices, personal income tax in Vietnam needs to be changed

In order to reduce personal income tax (PIT), salaried employees have brought many suggestions to increase the deduction and lower the tax rate this year.

Gasoline prices have increased six times during the past two months, pushing up prices of vegetables, eggs, and meat. Moreover, the outbreak of the COVID-19 pandemic made the income and life of taxpayers severely affected. So, the state needs to establish sharing policies.

In the context of the complicated development of the Covid-19 pandemic, the income and life of taxpayers were severely affected. The income was remarkably decreased due to the company’s difficulties in the COVID-19 pandemic. Until now, the income has recovered yet. Meanwhile, the market price has increased significantly, and the gasoline prices have increased six times during the past two months, leading to an increase in the prices of many commodities. Many people are worried about the decrease in wages and the stability of taxes. Hence, there are many opinions that the state should establish sharing policies.

According to Assoc. Prof. Dinh Trong Thinh, tax rate and the corporate income tax decreased from 28% to 25%, and currently is at 20%, while the personal income tax for tax tiers remains at the highest level up to 35%.

According to the share of Ms Thu and Ms Bich Thuy (living in Binh Thanh District, Ho Chi Minh City), salaried workers as she has not received supportive policies yet after two years of COVID-19, while businesses are entitled to tax reductions. Ms. Bich Thuy stated that the tax services should have established supportive policies for wage earners like us to nurture revenue. The deduction for employees and dependents cannot guarantee a living in the current context.

Ms. Pham Thu Thao (living in Dong Da district) – deputy manager at a large enterprise in Hanoi, said that her income in 2021 decreased by approximately 30% compared to the previous income due to the COVID-19 pandemic. In 2022 and beyond, income continues to be cut down by 15%. Cost of living increased. The entire family had COVID- 19; the treatment costs are very expensive. However, at the end of the month received a salary, her income is still temporarily withheld from personal income tax. She expressed her pressure because working hours is usually 12-13 hours instead of 8 hours. Despite being sick, the couple also has to take care of their children and elderly parents.

Family allowances need to be increased according to the minimum wage

For the reason that if personal income tax has been reduced from salaries and wages during the past six months of 2021, the beneficiaries will mainly fall into the high-income group, which is not consistent with the target of supporting difficult ones in the pandemic. The Ministry of Finance has not proposed a policy to reduce personal income tax for salaried employees though the COVID-19 pandemic has seriously impacted during the past two years.

According to Mr. Nguyen Duc Nghia – deputy director of the Service Center supporting small and medium-sized enterprises of Ho Chi Minh City Business Association stated that this explanation is not entirely convincing, the increase in the deduction from 9 to 11 million/month from June 2020 is only to solve past stories that Consumer Price Index (CPI) has increased by 20%, not to support individual income taxpayers. In fact, from 2020 to now, prices have increased speedily, and the level of 11 million VND/month does not ensure the quality of life of workers, especially in big cities such as Hanoi and Ho Chi Minh City.

Mr. Nguyen Duc Nghia expressed that the Law on Personal Income Tax should be amended in the direction of family circumstance deduction level for employees according to the regional minimum wage, so that the regional minimum wage annual increase, the deduction automatically will be reduced to shorten the disadvantage for salaried workers. Besides, it is necessary to increase the family circumstance deduction level for dependents up to 70% of the deduction for employees because the current level of 4.4 million VND/month is not enough for living expenses, etc. It is unfair to state that foreigners are allowed to deduct tuition fees whereas domestic ones are not.

A tax expert, Nguyen Thai Son stated that if you do a small comparison, you will recognize that with the same income, salaried workers have to pay much higher tax (because the highest progressive tax rate is up to 35 %) compared to that of individuals from Google, YouTube, etc. because they only have to pay 2% tax on revenue.

In the past years, the corporate income tax has been decreased from 28% to 25% and currently is at 20%, while the personal income tax for tax tiers remains at the highest level up to 35%. Therefore, Assoc. Prof. Dinh Trong Thinh, currently is a senior lecturer at the Academy of Finance, recommended that it is necessary to reduce the tax levels and the tax rates of the tax levels in the partially progressive tariff. Thus, instead of 7 levels, progressive tariff needs to be reduced to 3 levels with tax rates of 5, 15 and 20%. Besides, Mr. Thinh expressed, it is necessary to raise the taxable threshold to 20 million VND/month for taxpayers and 10 million VND/month for dependents because the current application level is outdated.


Total personal income tax over the years (Source: Ministry of Finance - Data: Le Thanh - Graphic: N.KH)
Total personal income tax over the years (Source: Ministry of Finance – Data: Le Thanh – Graphic: N.KH)

Assoc. Prof. Thinh emphasized that the Ministry of Finance should quickly propose the Government submitted to the National Assembly for consideration of reducing personal income tax for employees this year. This is necessary and advisable because it is good for strengthening the population’s health, stimulating domestic consumption demand, increasing product consumption, and creating motivation for the recovery and development of production and business activities.

According to a tax expert Nguyen Thai Son, the current context has much changed compared to that of applying Personal Income Tax Law in 2009, so why harden the family deduction at 11 million VND/month without allowing correct calculation of expenses from food, clothing, accommodation, travel, study, medical examination, and treatment, etc. if there are invoices and vouchers.

Currently, e-invoices have been applied, so this is not a difficult task but also it encourages people to get invoices anytime and anywhere. From then, businesses, shops and business households will also have no way to avoid tax due to how much revenue will be revealed. With such a ” to kill two birds with one stone; to cut two trees with one saw”, why doesn’t the tax industry boldly innovate in order that the State and the people can benefit together?

ASL LAW is the top-tier Vietnam law firm for tax law consulting service. If you need any advice, please contact us for further information or collaboration.


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