Vietnamese taxpayers want to enjoy more lenient rules when they become ill, as the current regulations will give little or no relief for their financial burden.
Local payers of the personal income tax lament that they will still have to fulfill tax obligations, or are only eligible for a modest exemption or reduction even when they catch serious or fatal diseases.
In the meantime, the current procedure for sick taxpayers to apply for such a reduction or exemption is so complicated that few are able to follow through all the paperwork to get their benefits.
Vietnam currently applies progressive personal income tax, with the taxpaying threshold set at VND5 million (US$223) and the tax rates ranging from five percent to 30 percent.
The taxable income is calculated by deducting VND9 million ($402) from an individual’s total income, and another VND3.6 million ($161) for each of their dependents.
For instance, a man who earns VND20 million ($893) a month with an under-18-year-old child has a taxable income of VND7.4 million ($330).
Also under the current tax law, if that person has one in a list of 42 serious diseases – cancer, heart attack, stroke, coma, kidney failure, brain injury and blindness – or has paralyzed/amputated legs/arms, he/she can apply for a tax reduction or exemption.
The tax relief, however, is not allowed to exceed the total tax that person has paid in the year he becomes ill or starts receiving treatment.
This regulation is causing trouble to taxpayers.
In 2015, Tran Thi Hau, a Hanoi liver cancer patient, had to spend VND150 million ($6,696) covering treatment for her disease.
Due to her illness, Hau had to quit work for six months, and her income dropped accordingly. The woman paid a total of VND26 million ($1,161) in income tax in 2015, meaning she was only able to enjoy a tax reduction of VND26 million as per the rule.
Hau said she had paid up to VND30 million ($1,339) in income tax every year in the pre-2015 period, but the calculation was done on the very year when she had lower earnings.
A chief accountant at the tax office in Phu Nhuan District, Ho Chi Minh City, said there have been cases in which taxpayers started their retirement or almost had no taxable income in the very year their tax reduction and exemption are calculated, so they “received no tax relief at all.”
“Taxpayers feel unfair as the huge amount of taxes they paid in the past is useless,” he said.
An official at a tax office in Ho Chi Minh City said the current regulation just “provides insignificant relief for sick taxpayers.”
He added that this appears to be the reason why his tax office has so far received only a couple of taxpayers who came to apply for tax exemption or reduction to cover their medical treatment.
But the chief accountant in Phu Nhuan District said red tape may be another reason because “you have to provide numerous different papers to complete the procedure.”
Many taxpayers have demanded that the reduction and exemption be calculated based on their tax payments in the subsequent years from the year they become ill or start treatment.
“This is a reasonable proposal and I personally back this idea,” said Ta Thi Phuong Lan, deputy head of the agency in charge of personal income tax under the General Department of Taxation.
Lan said businesses are currently allowed to carry over their losses in one certain year to the following years to reduce the amount of corporate income tax, so individuals should be allowed to do the same to ensure fairness.
“The tax rule must be changed to create fairness between individuals and businesses,” she said.
“Exempting or reducing taxes for taxpayers suffering ailments basically has no impact on the state budget revenue.”