Experts have called for the removal of the highest rate of 35 per cent in the personal income tax (PIT) bracket to ensure fairness and encourage transparency and productivity.

The Ministry of Finance has proposed the number of PIT brackets to be reduced from seven to five while maintaining the current top rate of 35 per cent in the latest draft amendment to the Law on PIT which aims to simplify the progressive tax system applied to monthly income.

The current bracket includes seven tiers, 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent, 30 per cent and 35 per cent.

In the draft, the ministry proposes two options for reforms. In both options, the lowest tax rate of 5 per cent would apply to taxable monthly income of VNĐ10 million (US$400) after reduction.

The highest rate of 35 per cent would apply to income exceeding VNĐ80 million in the first option or VNĐ100 million in the second option.

Streamlining the tax brackets to five tiers rather than seven is reasonable, Lê Thị Thuỷ, CEO of Bach Khoa Tax Consulting Service Company Limited, said.

Thuỷ opted for the ministry’s second option which sets the highest rate for income above VNĐ100 million and offers more generous bracket spacing.

Nguyễn Văn Được, head of the Policy Department under the HCM City Tax Agents and Advisory Association, also supported the streamlining of the tax brackets. However, the 35 per cent rate is too high which might discourage wealth creation and foster tax avoidance.

“I think that the tax bracket of 35 per cent should be removed. The highest rate should be 30 per cent to motivate wealth creation,” he said, adding that a reasonable tax bracket will help create a competitive labour market, attract talents and prevent income leakage.

Được also called for stronger reform. The lowest bracket should be expanded for income up to VNĐ20 million, then 15 per cent for the VNĐ20-40 bilioon range, bypassing the 10 per cent rate entirely.

Restructuring the lower tax tiers would help ease the tax burden on most earners while promoting compliance and transparency from high-income earners. — VNS

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