Struggles of Vietnam's Middle Class Under 16-year-old Tax Code Elicit Sense of Punishment
In the bustling cities of Vietnam, the cost of living has significantly risen over the past 16 years, while the nation's per capita GDP has more than doubled. Amidst this economic growth, concerns about the impact of personal income tax (PIT) on middle-income earners have surfaced.
A recent proposal aims to address these concerns by reforming the PIT system. The draft bill suggests reducing the number of brackets from seven to five, with the lowest rate remaining at 5% and the highest at 35%. The proposed options retain the lowest rate and the highest, but Option 2 raises the threshold for the top rate to VNĐ100 million from VNĐ80 million.
According to a study, middle-income earners in Ho Chi Minh City now face a harder path to home ownership than their counterparts in Singapore, where the top PIT rate is just 22%. A woman earning around VNĐ30-32 million a month could see her tax rate jump to 25%, 5% higher than today, according to Au Thi Nguyet Lieu.
Economist Nguyen Duc Thanh states that the current tax brackets no longer reflect reality and punish effort and discourage productivity. On the other hand, experts warn that sharp increases between brackets, especially from 5% to 15%, could burden middle-income earners.
Pham Minh Quang, a 35-year-old software engineer in Ho Chi Minh City, experiences a significant portion of his raise being deducted as taxes. His monthly income places him in Vietnam's highest PIT bracket, which is 35% for earners above VNĐ80 million ($3,150) per month.
To alleviate this burden, Tra Van Tung has urged policymakers to reinstate the 10% tax bracket for monthly incomes between VNĐ15 million and 30 million, and to cap the top rate at 30%. Nguyen Thuy Duong recommends adjusting the top rate to 30% in line with Malaysia, Indonesia, and Thailand.
Lee Khanh Lam suggests a PIT system that balances fairness, competitiveness, and incentive, rewarding work, encouraging saving, and reflecting today's economy. Freelance professionals like Le Mai Anh, a 40-year-old marketing executive in Hanoi, are shifting away from full-time employment to avoid higher tax brackets.
The proposed reform aims to create a more equitable and competitive PIT system, one that encourages productivity and supports middle-income earners. As the debate continues, it is clear that finding the right balance is crucial for Vietnam's economic growth and the well-being of its citizens.
