Ministry of Finance proposes to reduce the number of levels in the personal income tax table

The current tax schedule is unreasonable, with too many levels and too narrow a gap between levels, which can easily lead to a jump in levels, increasing the amount of tax payable and the number of tax settlements unnecessarily. The Ministry of Finance proposes to reduce the number of levels from 7 to an appropriate level.

In the Government's proposal to develop a draft Law on Personal Income Tax (replacement), the Ministry of Finance proposed adjusting the progressive tax schedule applicable to resident individuals with income from salaries and wages.

The goal is to reform administrative procedures, creating convenience for taxpayers and tax authorities during the implementation process.

Ministry of Finance explains: Clause 2, Article 22 of the Law Personal Income Tax (PIT) prescribes a progressive tax schedule applicable to income from salaries and wages with 7 tax rates: 5%, 10%, 15%, 20%, 25%, 30% and 35%.

There is a view that the current progressive tax schedule is unreasonable, with too many levels and the gap between levels being too narrow, which can easily lead to a jump in tax levels when summing income at the end of the year, increasing the amount of tax payable, and the number of tax settlements needing to be made increases unnecessarily while the amount of additional tax payable is not much.

The application of progressive personal income tax rates is a common policy in many countries around the world . Recently, some countries have tended to simplify the tax schedule by reducing the number of levels.

The Ministry of Finance proposes to reduce the number of tax rates in the current Tax Schedule from 7 to an appropriate level. Photo: Nam Khanh

“Through reviewing the current tax structure and studying the trend of improving people's living standards in the coming time as well as international experience, Vietnam can study to reduce the number of tax brackets of the current Tax Schedule from 7 brackets to an appropriate level; along with that, consider widening the income gap in tax brackets, ensuring higher regulation for those with income at high tax brackets. Implementing in this direction will contribute to simplifying and reducing the number of tax brackets to facilitate tax declaration and payment by taxpayers,” the Ministry of Finance's submission stated.

The Ministry of Finance noted that the amendment of the Personal Income Tax Schedule will be carefully studied and considered and must be consistent with the orientation set out in the Tax System Reform Strategy to 2030, ensuring that it is consistent with the socio-economic context, income, living standards of the people, and with international practices, ensuring the rights of workers, encouraging the development of the labor market in the context of international integration, and ensuring revenue for the State budget.

According to the Draft Outline of the Personal Income Tax Law (replacement) attached to the Government's Submission, the progressive tax schedule is stipulated as follows:

Tax level	Taxable income/year (million VND)	Taxable income/month (million VND)	Tax rate (%)
1	Up to 60	Up to 5	5
2	Over 60 to 120	Over 5 to 10	10
3	Over 120 to 216	Over 10 to 18	15
4	Over 216 to 384	Over 18 to 32	20
5	Above 384 to 624	Over 32 to 52	25
6	Above 624 to 960	Over 52 to 80	30
7	Over 960	Over 80	35