Vietnam to reduce its income tax base by 75 percent

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 Amendments to the Personal Income Tax Law will reduce the number of personal taxpayers to just one million

Vietnamese legislators on Thursday passed amendments to the Personal Income Tax Law that will release nearly 75 percent of taxpayers from the obligation, even amid concerns about falling revenues for the state budget.

Under the amendments, the threshold for personal income tax will be raised to VND9 million (US$430) per month from the current level of VND4 million, effective July 1.

Taxpayers will also be allowed to set aside VND3.6 million per month for each dependent compared to the current VND1.6 million.

Deputy Chairwoman Nguyen Thi Kim Ngan of the National Assembly said last week that while some lawmakers demanded the revised law to take effect as soon as January 1, it is necessary to push back the date to July to avoid a sharp decline to the state budget.

She said even a mid-year start date would mean a loss of VND5 trillion ($240 million) in tax revenues for 2013.

Legislators are scheduled to wrap up their ongoing twice-yearly meeting in Hanoi on Friday.

According to the Ministry of Finance, there were only 3.87 million personal income taxpayers in Vietnam last year, out of 12.6 million wage earners. New amendments to existing law will reduce the number of taxpayers to just one million.

The ministry originally proposed the law take effect in 2014, but legislators decided to put it into practice next year, saying taxpayers could not wait that long amid the economic downturn.

Do Manh Hung, deputy head of the social affairs committee of the National Assembly, said the government needs to collect taxes reasonably to ensure a sustainable source of income for the state budget.

Hung said even though an early implementation date will lead to huge tax revenue losses, he believed many taxpayers struggling with high consumer prices need the relief as soon as possible.

Legislators earlier this month asked the government to keep its budget deficit at VND162 trillion ($7.84 billion) for 2013, or 4.8 percent of the country's gross domestic product.

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