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Official calls for delay in personal income tax law   2008-12-25 - TN, TT

Residents waiting for their documents to be processed at the Ho Chi Minh City Tax Department in District 3 earlier this month  
The Personal Income Tax Law is due to take effect in a week but one senior government official has suggested delaying the tax to stimulate investment and consumer spending in the face of continued economic difficulties.


Le Quoc Dung, deputy director of the National Assembly’s Economic Committee, said the Ministry of Finance (MOF) had prepared two options for the implementation of the law – delaying the introduction of the law to July 1 next year or implementing the law, as originally planned, on January 1 but with exemptions for some sectors.

“We will have time to check and make the law more effective if we delay its implementation,” Dung said. “In the second option, the MOF plans to reduce the capital gains tax for stock trading. But in my opinion, the economic slowdown hasn’t only hit stock market investors, it’s affected everyone.

“So people will be hit hard if we don’t delay the implementation of the law.”

Dung said some regulations of the law, such as deductions for dependants, were not “suitable” for the current economic climate.

“Under the Personal Income Tax Law, the deduction for each dependant is VND1.6 million (US$100) and the tax-free threshold is VND4 million ($238) a month. But these levels are not appropriate because double-digit inflation has devalued incomes of employees by one-quarter,” he said.

Delaying the tax to give workers more take-home pay would increase consumer spending, he said.

Problems clarifying dependants

Local people found the definition of a dependant too complicated. According to the Personal Income Tax Law, the dependant can include children aged under 18 years of age, disabled people of all ages, unemployed spouses and retired and unemployed parents.

A citizen named Dinh in Ho Chi Minh City’s Tan Phu District said he was struggling to prove his grandmother, who he takes care of, was a dependant.

Dinh used his and his father’s birth certificates to prove she was his grandmother but her name isn’t on his permanent resident registration so he isn’t sure whether the local administration or the office which issued his grandmother’s permanent resident registration will confirm the dependency.

Thanh, who lives in HCMC’s District 1, said she supported her brother, who earns low income, to raise his two kids, by giving him a monthly allowance. But according to the law, she is not allowed to make deductions for the children because their parents are still alive.

Many people have also written to Thanh Nien expressing their unhappiness with the Personal Income Tax decree on dependant deductions, particularly the clause that states a person can only be counted as a dependant only if their monthly income is less than VND500,000 ($30).

HCMC Tax Department Chief Nguyen Dinh Tan said taxpayers could ask their local administration or the agency that issued their dependants’ permanent resident registration to confirm their relationship.

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