Jun 1, 2012

Vietnam - MOF ignores suggestions on PIT law

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VietNamNet Bridge – People have fallen back into despair after they realized that the draft personal income tax (PIT) law submitted by the Ministry of Finance (MOF) to the government, was nearly the same as the draft opened for public opinions some months ago.

Dr Le Dang Doanh, former Head of the Central Institute for Economic Management CIEM, said on Tuoi tre that the suggestions on setting up higher rebates for tax payers and independent family members has been ignored, which shows that MOF still tries to impose its viewpoint on people and tax payers.

Doanh said the inflation rate has reached 40 percent since 2009, which means that the actual income of people has decreased seriously. Therefore, tax payers have every reason to make complaints when they are overtaxed.

Lawyer Tran Xoa, Director of Minh Dang Quang Law Firm, has confirmed that the draft law submitted by MOF does not contain any considerable changes in comparison with the version made public before.

The most noteworthy things of the draft law are the rebate increase for tax payers from 4 million dong currently to 6 million dong, the rebate increase for independent family members to 2.4 million dong, and the removal of the tax rate of 35 percent.

Xoa said that though MOF invited people to make suggestions to the draft law, it did not listen to the public’s opinions.

Le Khanh Lam, Deputy General Director of DTL auditing firm, said that MOF should not only strive to collect as much in tax as possible, while it should design the law in a way so as to obtain three goals at the same time 1) ensuring the good life for tax payers 2) ensuring the easy implementation of the law and 3) ensuring the sufficient tax collection to the state budget.

People have expressed their despair when hearing about the new version of the draft PIT law. Dai Doan Ket has quoted Nguyen Van Ngoc, a worker of Van Lang Company in Ha Dong district, said that the new taxation threshold of 6 million dong would be “out of date” if it would only be applied as of 2014.

“MOF should consider the possible inflation rates for the next two years while the State should give support to tax payers. Six million dong would be not enough for a worker to ensure their basic needs by 2014, if the double digit inflation rate tendency continues,” he said.

Nguyen Thi Hien, an accountant of Company No. 29 belonging to the Ministry of National Defense, also said that the new taxation threshold at 6 million dong is unreasonable.

Hien said that the current average income of the company’s 200 workers is 5 million dong, which is just enough to cover the basic needs. Therefore, she believes that the new taxation threshold should be applied right from 2012.

The MOF’s draft PIT Law was not welcomed by associations, enterprises and independent economists as well, according to local business newspapers.

However, MOF has been insisting on its viewpoint, saying that the tax rates have been defined after thoroughly considering the conditions.

A high ranking official of the ministry said the rebate levels suggested by MOF are suitable to the GDP growth rates and the society’s income increases by 2014 and the next years, affirming that the taxation thresholds would not put difficulties for tax payers.

Also according to the ministry the taxation threshold of 6 million dong is equal to 1.7 times of the average GDP per capita by 2014, and 3.6 times higher than the minimum wage in the society by that time.

PIT is considered a kind of tax imposed on high income earners. However, in fact, a lot of high income earners do not have to pay this kind of tax, because no one can control their income. PIT has been mostly imposed on employers, whose income is clearly shown on the payrolls.

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