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Are taxpayers getting a fair deal?

Update: September, 27/2012 - 09:13

by Ngoc Bich

Recently, people have been shocked to hear news that the National Assembly's Committee for Finance and Budget opposed the Government's proposal to raise the personal income tax threshold to VND9 million (US$429) from the current VND4 million ($190), saying the new level was too high and would affect State revenues.

The committee suggested the threshold should be VND7 million ($333) and the deduction for each taxpayer's dependant should be VND2.8 million ($133) per month, instead of the VND3.6 million ($171) recommended by the Government.

Surprisingly, the committee members are supposed to represent the people but choose to reject law amendments expected to provide relief to taxpayers amidst skyrocketing levels of inflation.

And ironically, in mid-August, the National Assembly's Economic Committee released a report in which economists said each Vietnamese person is burdened with a tax and fee/GDP ratio 1.4-3 times higher than those in other regional countries.

Vietnamese taxpayers have to pay higher personal-income taxes than their counterparts in China and Thailand, even though their incomes are much lower, the report, sponsored by the United Nations Development Programme (UNDP) in Viet Nam, claims.

Vietnamese taxpayers, whose average annual earnings range between $3,451 and $5,175, are subject to a 10 per cent personal income tax, while the respective tax brackets in Thailand and China are $4,931-$16,434 and $3,801-$9,500.

However, since the Law of Personal Income Tax came into effect in January 1, 2009, the inflation rate accumulated has reached nearly 40 per cent so far, meaning the real income of taxpayers has been reduced by 40 per cent.

Seeing the upward trend of inflation, I even think the threshold of VND9 million is still a low level as the proposal, if approved, will come into force from the beginning of July next year.

How irrational the finance and budget committee's fear that the State budget revenue would be reduced! According to Government estimates, the State budget would see a loss of VND5.2 trillion ($247.6 million). The figure is not equal to half of the investments that the Construction Ministry proposed to build a national museum of history or the amount of money that the Transport Ministry asked for to build its new headquarters.

Assuming the amendments are not passed and the budget does not lose the sum, will it be spent effectively? Will it go to people who are really in need?

Clearly, people will be willing to pay taxes if they see their State contributions effect real change in society.

But let's look at the infrastructure system. Every year, the Government spends trillions of dong in building roads, bridges and drainage systems, but people still struggle miserably with traffic jams and floods.

Despite planning to cut public investment, it seems the Government is favouring infrastructure projects over welfare.

Looking at public provisions such as the health service, three to five patients still have to share a bed. Meanwhile, hospital fees continue to rise.

Then look at the social welfare system. It is true that the Government always has priority policies for the poor, disadvantaged, elderly and children, but the State money spent for them is still limited. Total State expenses for social welfare in 2011 was VND84 trillion ($4 billion), which despite being 20 per cent higher than 2010, still only accounts for 12 per cent of the total budget.

Some people might blame the situation on the traditional family attachment of eastern countries. In Viet Nam, there are cases in which four generations live in one house and obviously, they have to take care of each other. Those still capable of working will have to take care of those who can't as a matter of course.

I recently read a touching story of a 70-year-old woman in a central district of the city has to pick up and sell waste materials to provide for her disabled son and 10-year-old grandson.

The 10-year-old boy might have never been able to go to school if the story was not published and kind-hearted people did not give money to his family.

Having visited some western countries, I learned that the elderly are often provided enough allowances to ensure a minimum standard of living.

In fact, the Government also supplies a retirement pension for the elderly but on the condition that they used to work in a State-run sector. Clearly, the State budget is facing a serious deficit, especially under the current economic downturn; and increasing the source of collection is one way to fix the problem. But taxing people is not a suitable solution at this time.

The important thing is to allocate and use State funds efficiently. As long as people see their money being put to good use, they will be more prepared to contribute. — VNS

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