Vietnam mulls tax exemption for low income earners

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The Finance Ministry has proposed income tax exemption for citizens with monthly incomes of VND5 million (US$240) or less, Tuoi Tre newspaper reported Thursday.

The current taxable income threshold is VND4 million a month. Taxpayers are allowed to deduct VND1.6 million for each dependent.

Vietnam's Personal Income Tax Law was approved by the National Assembly in late 2007 and came into effect on January 1, 2009.

Many taxpayers and analysts have said that in the context of higher consumer prices, amendments to the law need to be made to help ease the burden on citizens. They proposed higher taxable income levels and more deductions for dependents.

The Finance Ministry said that until the law is amended, the government should waive income tax for taxpayers in the low income bracket.

According to the ministry, more than 200,000 people would benefit from this policy. It noted that the total amount of tax revenues from this group is currently small since their income tax payment does not exceed VND50,000 ($2.5) a month.

Economist Pham Chi Lan, a former government advisor, said the proposal was a "positive" signal. However, she said, even the new taxable level at VND5 million is still too low amidst soaring inflation.

Citizens should only be taxed when they earn 10 times higher than the nation's minium wage, the Tuoi Tre report quoted her as saying.

Vietnam's consumer price index rose 13.9 percent in March from a year earlier, after increasing 12.3 percent the previous month. The government plans to lift the monthly minimum wage to VND830,000 ($40) from VND730,000 ($35), effective May 1.

Economist Le Dang Doanh said the Finance Ministry's proposal was "too little" and "too late". Many other countries have announced tax breaks for their citizens even though their inflation rates are lower than that of Vietnam, he said.

Doanh added that tax polices, if too harsh for payers, will lead to tax evasion practices. "Only reasonable tax rates can encourage citizens to fulfill their tax duties."

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