Tài liệu Completion of state management of personal income tax in vietnam

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1 2 The urgency of the thesis Implementing tax reform in Vietnam, personal income tax law become effective since January 1st 2009, replacing Income tax Ordinance for highincome earners is a step forward in policy formation; however, through the process of implementation, the personal income tax law has revealed some inadequacies. Although the amending and supplementing some law articles of the personal income tax law (effective since July 1st 2013) surmounted many defects; however, in the process that the entire humanity resolves global problems together, the Government of Vietnam still has to put great efforts into reforming and modernizing in order to fulfill the tax system in the process of global integration. Before the practical demand of a synchronous tax management policy and mechanism which catches up with the economic and social development, the research of the process of state management of personal income tax has become an urgent need. This is the reason why the author has chosen “Completion of state management of personal income tax in Vietnam” as the doctoral thesis in Political economics. 2. The purpose and research content of the thesis 2.1. Purpose of the research thesis - Systematizing and supplementing theoretical issues and practical experience in state management of personal income tax in other countries and in Vietnam currently; - Evaluating the reality of state management of personal income tax in Vietnam; - Proposing opinions, orientations and basic solutions to complete state management of personal income tax in Vietnam. 2.2. The content of the thesis - Clarifying the theoretical content of the state role in the formation of personal income tax role policy and in the fulfilling of the state role of personal income tax in Vietnam. The research focuses on the impacts on taxpayers’ voluntary compliance. - Analyzing the state’s practical role in the formation and completion of the personal income tax collection’s management policy and mechanism in Vietnam recently; pointing out the achievements, limitations and causes of the problem. - Offering an orientation and some solutions to strengthen the state role in the personal income tax management in Vienam, paying attention to the changing of tax management thinking purely “administrative orders” to “serve the public administration”, respecting and honoring the true value of the economic – political – social contributions of taxpayers. 3. The objects and scope of the research - The research objects: State management of personal income tax being done through legislation, policy, administrative system, administrative methods, sense of law observance of taxpayers… - The research scope Theoretically: The theoretical issues related to personal income tax and state management of personal income tax in Vietnam and other countries. Practically: o Practical experience in other countries. o The reality of state management of personal income tax in Vietnam About time: Secondary data collected from 2009 to date; primary date collected in 2012; the Survey of the personal income tax management policy and mechanism system in Vietnam during the implementation of the Income tax Ordinance for high-income earners, focusing on analyzing the execution time of the personal income tax law (2009) of tax authorities and taxpayers. 4. The research methododology This thesis uses synchronously traditional analytical methods, research tools such as dialectical materialism and historical materialism methods, analytic and synthetic method, statistic and comparative method; consulting documents and reports of related management agencies; consulting published reports, researches, magazines and using investigation documents, surveys, collecting statistic and analytic data… of published thesis, projects, researches; Interview managers, experts, scientists to learn about some impacts of the factors to taxpayers’ voluntary compliance. Collected survey forms, after being revised and disposed of unsuitable ones, are result-treated with the specialized computer software SPSS. 5. Contributions of the thesis  Discoveries of the research: The research has displayed advances and restrictions of the policy, as well as the existence of personal income tax management mechanism in Vietnam.  Differences of the research: The research has updated achievements and has showed limitations of state management of personal income tax in Vietnam; meanwhile, proposing the routine of reforming the tax policy with the gradual reduction of tax rate in the next 2 periods of tax policy reform in 2017 and 2022, using mathematical cacultaion that evaluates how the reform impacts taxpayers’ budget duty.  Strong points and new contributions of the research: The research has systematized experience of other countries, has displayed the existence of management policy and mechanism in Vietnam, including research of international organizations which are assisting Vietnam in the tax system reforms such as WB, IMF, OECD, EU, JICA. 6. Structure of the thesis Besides the preamble, conclusion, preference and appendix, the main content of the thesis has been structured in 4 chapters: Chapter 1: Overview of the research situation related to the thesis PREAMBLE 1. 3 Chapter 2: Theoretical and practical foundation of state management of personal income tax Chapter 3: Reality of state management of personal income tax in Vietnam Chapter 4: Solutions to upgrade state management of personal income tax in Vietnam 4 CHAPTER 1 OVERVIEW OF THE THEORY RELATED TO THE THESIS 1.1. Overview of the situation of tax and personal income tax research 1.1.1. Research relating income tax in some countries During the research process, the author has consulted other studies like: “An Inquiry into the Nature and Causes of the Wealth of Nations” (Adam Smith - 1776); “Economics” (Paul A.Samuelson and William D.Naudhaus – 1997); “Initiation of tax law fundamentals and tax theory” (translated by Vietnamese Research Center – 1963); etc. So, we see that the issues of personal income tax have attracted the concern and research of many modern international scientists. 1.1.2. The elaborate works about personal income tax in Vietnam Laid the foundation for the economic theory in general and tax theory in particular, shown in the works: “Tax curriculum” (General Department of Taxation – 1991); “Tax and tax system curriculum in Vietnam” (Prof. Dr. Bui Xuan Luu, Dr. Nguyen Huu Khai, master Nguyen Xuan Nu, Vietnam Education Publishing House – 2003); “Tax management system” (Dr.Nguyen Thi Bat, Dr.Vu Duy Hao – 2002); “State management in economics curriculum” (Dr.Mai Van Buu, Dr.Doan Thi Thu Ha – 1999); “State management in economics” (Dr.Mai Van Buu, Dr.Phan Kim Chien – 2001). Several works, topics, studies about the formation and completion of policy system and management mechanism of personal income tax collecting such as: “Model of income tax application in Vietnam” (topic, 1994), “Property tax model in Vietnam” (topic, 1995); “Investigation on income, savings and investments of residents” (topic, 1998); “Completion of personal income tax in the new situation” (topic, 2000); “Personal income tax in the world and application of orientation in Vietnam” (2002); “Solutions for tax management’s completion in Vietnam in current situation” (monographic book, 2003); “Personal income tax reform in Vietnam” (2005); “Personal income tax law formation project” (2007); “Tax management innovation in conditions of economic integration in Vietnam” (Le Duy Thanh, PhD thesis, 2007); “Completion of personal income tax policy in Vietnam in accordance with the process of international economic integration” (Nguyen Xuan Son – 2007); “Personal income tax management in Vietnam in conditions of international economic integration” (Ly Phuong Duyen – 2009); “Tax management in Vietnam in conditions of international economic integration” (Nguyen Thi Thuy Duong – 2011), etc. Moreover, there’re a lot of studies belonged to international personal income tax partners with Vietnam. Those studies refer to the key issues such as: 1) The current situation of tax policy, tax management and the accordant 5 6 solutions with the process of Vietnamese’s economic integration; 2) State management of administrative reform and tax reform; 3) Research on the implementation and recommendations of amendment personal income tax law. Conspicuously, the personal income tax issue has been the concern of many scholars, scientists, academics and media. However, there has not been any study on both two aspects of state management: management policy and mechanism to analyze deeply, to point out the existence, and then to propose solutions of completing the state management to personal income tax. From the evaluation, the author has discovered a gap that must be filled CHAPTER 2 THEORETICAL FOUNDATION AND PRACTICAL EXPERIENCE OF STATE MANAGEMENT OF PERSONAL INCOME TAX 1.2. The results and issues that must be continued to research Through the works above, it is clear that the scholars have concluded many academic issues on taxation, focusing on research of state management, on administrative reform added tax reform, on the implementation and recommendations of amended personal income tax law. During the process of reform and complete Vietnamese tax system, the works of international partners like WB, IMF, EU, OECD, JICA play an extremely important role. The work in Vietnam and other countries have analyzed the aspects of state management in an adequate and profound way, either about policy or about collecting management mechanism immediately since personal income tax has been regulated by Income tax Ordinance for high-income earners, corporate income tax and land use right transfer tax. Implementing personal income tax law, the renovation process, the administrative reform or the law enforcement, amendment, researchers, along with the media have published numerous articles and contributed to the process of completing state management of personal income tax in Vietnam. In spite of many advances, personal income tax collecting management policy and mechanism still have some limitations. Vietnamese personal income tax law still exist too many types, the collecting system’s functions are not effective yet; the evaluation of international partners of tax system’s corruption is very weak… Those factors have posed to policy makers, managers an urgency of a new reform for the tax service in order to complete the state management of personal income tax in Vietnam. Despite many work related to the state management of personal income tax, until now there has not been any work that had the systematic character of state management of personal income tax from theory to practice, then to propose ideas, orientation and solutions. Therefore, the chosen topic does not coincide with the published study results. 2.1. Basic understanding of personal income tax and the state management of personal income tax 2.1.1. Basic understanding of personal income tax 2.1.1.1. Some concepts of personal income tax: a) Income tax concept: Income tax is a type of tax that affects directly on the real income of taxpayers such as person or legal entity. The main characteristic of this type is the unity between the taxpayer and the taxbearer, the taxpayer himself is also the one that really bears this tax. b) Personal income tax concept: “Personal income tax is the type of tax that hits on the net income of individuals in a given tax period (usually a year) regardless of the income’s generation source.”1 2.1.1.2. Characteristics of personal income tax Personal income tax is a type of tax in the tax system, in addition to general characteristics, personal income tax has its own traits: it’s the type of tax that only affects on people with income high enough to be taxed; it has a progressive nature (the higher one’s income is, the more tax he has to pay); it doesn’t distort the price of goods and services. 2.1.1.3. The role of personal income tax - Personal income tax is an important source of the state revenue. - Personal income tax manages and regulates macroeconomics through enhancing or reducing income regulation of different social classes, affects the aggregate demand, so that diminishes or stimulates the economy. - Reasonable personal income tax policy encourages workers to increase their income through the appropriate commendation and reward policy, encourages the rich men’s contributions to build the country; and acts as a tool for the state to control and collect the population’s income. 2.1.1.4. Basic content of personal income tax: a) Taxpayers: According to the personal income tax law, taxpayers are defined as people or legal entities that areresponsible for paying personal income tax to the State. b) Taxbearers: In the tax law, they are the objects given to be taxed. c) Taxable base, tax base or taxable grounds: The grounds used for determining the amount of tax payable of one tax type that a taxpayer must hand over are called tax base or taxable grounds of that tax type. Usually the tax base of a tax type consists of these factors: Taxable object and taxable price. 1 Tax law curriculum, Tax business College, Political Administration Publishing House, 2010, p.330 7 8 d) Tax rate: Tax rate is the main part of a tax type, since it expresses the need to focus on financial resources for the state budget and the socio-economic adjustment policy. It’s also the top concern of taxpayers. Depending on each tax type’s regulations, different types of tax rate are applied accordingly. e) Tax exemption, tax reduction: Tax exemption, tax reduction is an exceptive factor specified in the tax law. The regulation that allows taxpayers not to fulfil the duty of paying the entire amount of tax, not to pay taxes to the state, is called “tax exemption”; or to pay just a part of it, is called “tax reduction”. f) Tax declaration, tax payment, tax collection mode: The tax declaration mode presents the rights and obligations of taxpayers in the observance of accounting records, receipts and in the supply of documents, accounting records and bills related to the calculation and collection of tax. The tax payment mode includes the rights and obligations of taxpayers with the state competent agency. The tax collection mode is the activity of the state competent agency. Additionally, the tax law also defines responsibilities and jurisdiction of state administrative agencies at all levels, state agencies involved in the process of tax collection; or responsibilities and jurisdiction of mandatory organizations and individuals that collect the tax. g) Violation and remuneration handling mode: In order to guarantee that the tax law is fulfilled thoroughly, focusing properly, fully and promptly tax revenues to the state budget, the tax law applies punitive sanctions of the state for person or legal entity that violates the law, remuneratory sanctions for those who fulfill the tax collection duty. 2.1.2. State management of personal income tax 2.1.2.1. The concept of state management of personal income tax a) State management of tax: - Tax management is the work of state administrative agencies in the tax field done through the formation of tax policy and the management of tax collection; through applying tax management strategy of each period; organizing the enforcement of tax law, operating, affecting and monitoring to ensure that taxpayers fulfill their duty of paying tax for the state budget in accordance with the law regulations. The state management of tax is the impact process with purpose and awareness of the state whose representative is the tax agency that organize, manage activities, mobilize the tax revenues to the state budget, carry out the targets proposed in each period; help people to execute law regulations of tax, fees, charges and other payments (referred to as tax) to the state budget; coordinate with organizations, individuals in the society to execute tax law regulations. b) State management of personal income tax: State management of personal income tax is the impact process aiming at raising awareness of the state on the mobilization of tax revenues to the state budget by way of legal documents, methods and organizations, competent agencies to achieve socio-economic goals. There are three levels of state management of personal income tax: For tax officials; for a tax agency, and for the state management system. 2.1.2.2. State management principles of personal income tax Despite being carried out by public authorities, tax management can’t be applied arbitrarily nor causes annoyance to taxpayers. It must follow state management principles and frameworks to ensure the process of tax collection: 1) Law compliance principle; 2) Unity, democratic centralism in tax management principle; 3) Justice principle; 4) Transparency principle; 5) Convenient, economical and effective tax management principle. 2.2. The need to fulfilling, content and factors influencing on state management of personal income tax 2.2.1. The need to fulfilling state management of personal income tax In the past few years, the globalization tendency promoted the integration and development process of all economies in the world. Accordingly, tax system with the policy framework, the collection mechanism have been reformed in a positive way with the general trend, improved gradually, in accordance with international criteria, performed the role of a state tool and regulated the state’s macroeconomics effectively. In this context, fulfilling state management of personal income tax becomes an urgent need, for the following principal reasons: - Completing state management of personal income tax to promote the positive role of tax to achieve the objective of social justice; - Completing state management of personal income tax to elevate the public awareness of citizens. - Completing state management of personal income tax to add more revenues to the state budget, to meet the demand for social spending. 2.2.2. The content of state management of personal income tax 2.2.2.1. Enacting the legal framework of personal income tax law and policy In order to complete the personal income tax law and policy, to achieve the success in encouraging people to comply with tax law, in addition to researching, learning from the experience of countries that have succeeded in reforming the tax system, we also need to continue researching to expand the tax base and to clarify the taxable income; amend and supplement tax calculation method for each income in a simple way, consistent with the general practice, elevate taxpayers’ compliance, creat an environment favorable for the tax collection; adjust the tax rate reasonable to encourage individuals to enrich legitimately. 9 10 2.2.2.2. Completing the state management organization and staff of personal income tax Consisting of the following contents: Completing the tax management organization; building the tax officials team; determining the appropriate tax management organizational structure. 2.2.2.3. Tax collection management organization: propagandize, guide the process, operational methods, technology support The top priority task in the tax collection management organization is creating and executing basic processes and regulations in tax management including: tax registration, tax declaration, tax calculation, tax collection, debts control, tax refund, tax inspection and audit and handle tax law violations of taxpayers. 2.2.2.4. Personal income taxpayers inspection and audit Taxpayers inspection is inspecting the observance of tax law of taxpayers or inspecting the observance of the duty that the state requires in other words. The content of taxpayers inspection focuses on these basic issues: 1) Inspecting the observance of tax registration and tax declaration regulation; 2) Inspecting the observance of data, business documents storage mode of taxpayers; 3) Inspecting the observance of tax payment of taxpayers. About personal income tax management: Examples are Malaysia, Singapore, Thailand, Indonesia, China, South Korea, England, United States, Japan, Australia…2: For non-resident subjects, most countries apply the principle of income generation source to tax income generated in that country, except for Hong Kong where every individual resident and non-resident only has to pay income tax for the income generated in Hong Kong. In Netherlands, the Tax inspection manual is issued and reprinted frequently; it has become an effective tool for the tax agencies to perform their tasks. In Australia, tax collection system operates under the mode of self-declaration and self-payment from which taxpayers fulfill their duty in respect to the law. The tax agencies manage system risks through the balance of resources to ensure their citizens observe the law3. Besides,some Eastern European countries have eliminated the progressive tax rate, applied a homogeneous tax rate to income from salary, wages. In spite of having simplified things, this method has been criticized due to the problem of income redistribution. 2.3.2. The lesson about personal income tax management for Vietnam Through the synthesis and research of applying personal income tax reform in the world, Vietnam can learn these lessons to complete state management of personal income tax: 1) Building taxation model; 2) Determining taxable subjects; 3) Determining taxable personal income and nontaxable income; 4) Determining family allowances; 5) Determining tax rate and tariff; etc. According to the personal income tax management’s experience in other countries, the lessons that need to be applied to Vietnamese tax service include the following things 1) Managing organization of tax collection; 2) Upgrading the form and method of declaration; 3) Building data base and using information technology; 4) Developing human resources of tax officials. In summary, all the experience shows that personal income tax is an important revenue of the state budget, a tax type that has a wide range of adjustment, affects directly to the economic benefits of each individual in the society. Therefore, the application, execution and management of personal income tax is always a complicated topic and requires the attention of social sectors. In the construction of personal income tax law in every nation, the policy makers have to consider this issue carefully. 2.2.3. Factors impacting the state management of personal income tax There are many factors that impact the state management of personal income tax, including both positive and negative ones. These factors are steps to complete the personal income tax management. Specifically: 1) The state policy and the strictness of the law; 2) The effectiveness of the tax administration system; 3) Qualifications and moral qualities of the tax officials team; 4) Facilities of the tax sector; 5) The primary method of payment in the population; 6) The income status, living standards and educational level of the people. 2.3. Experience of state management of personal income tax in some countries and the lesson for Vietnam 2.3.1. Overview of experience in state management of personal income tax of some countries Personal income tax is the common tax worldwide and bears a history of hundreds of years. Until now, there are over 180 countries that apply personal income tax. Most countries nowadays (Japan, Indonesia, Malaysia, Thailand,…) identify the taxable incomes and classify them basing on their source of creation: Income from labor; from business; income from property for rent, transfer of property, inheritance, presents; income from indirect investments such as interest, dividend, income acquired through capital contribution; other income… 2 Report “Personal income tax reform experience of some countries in the world” (Ministry of Finance, 10/2012) The 2003-04 compliance program, The Australian Taxation Office, 2003, describes risks and the way resources of The Taxation Ofice being used to manage these risks. 3 11 12 CHAPTER 3 THE CURRENT SITUATION OF STATE MANAGEMENT OF PERSONAL INCOME TAX IN VIETNAM 3.1. Overview of state management of personal income tax in Vietnam (in terms of specific contents) The reality of legal documents of tax management and personal income 3.1.1. tax management in Vietnam capital investment, capital transfer, property transfer, income from inheritance, presents; 2) Taxable types of income are expanded corresponding to these terms: income from capital investment; income from capital transfer, real estate transfer including house ownership transfer and land use rights transfer; land and surface water lease rights transfer; income from inheritance, presents; from winning prizes of bet, casino; 3) Changing the taxable starting point by applying family allowances to taxpayers (4 million/month – 48 million/year) and dependent (1,6 million/month), expanding application for individual with business income; 4) Charitable, humanity, study promotion contributions; contributions to organizations, centers that care and foster children with especially difficult circumstances, disabled, homeless elderly, social security, professional liability insurance contributions for some industries that require compulsory insurance are considered tobe non-taxable income; Unity of tax duty between Vietnamese and foreigners.  The Law Amending and Supplementing a Number of Articles of Personal Income tax law 2012 Those are the amended and supplemented articles: - Changing the time of taxable period’s registration for individuals with income from stock transfer to register the taxable period at any time during the year. Removing the phrase “for all types of income” in the responsibility of personal income tax declaration, payment, settlement of individuals to conform to related regulations in case of changes arise later. - Increasing family allowances for taxpayers from 4 million/month (48 million/year) to 9 million/month (108 million/year); increasing deduction with each dependent from 1,6 million/month to 3,6 million/month to guarantee justice, encourage, attract experts, good workers; creat advantages for taxpayers, contribute to promoting administrative reform, tax management modernization; share difficulties, support earners, stimulate consumer demand, support business and production. - Regulations on allowances, subsidies deducted when calculating taxable income which distinguishes clearly and appropriately with related legal documents like social security, labor law…to ensure the unity of the law system. - More general about revenues for income from real estate transfer of individuals under all forms, including newly generated cases, authorization of house, land transfer, exchange of house, land that generates income. 3.1.1.1. Personal income tax law  Personal income tax law no.04/2007/QH12 has become effective since 01/01/2009. The main points of Personal income tax law are: - No discriminate Vietnamese citizens from expats living in Vietnam; No discriminate regular income from irregular income; - Tax more types of income: According to the law, there are many taxable types of income like income from capital investment, including interest, dividend, interest on capital, real estate transfer, copyright,…; - Nontaxable income, tax exemption income, tax reduction income; - Tax period: The tax period is the calendar year for income from business and working. For income from interest, dividend and profit, interest on capital, real estate transfer, lottery winning, copyright, franchising, technology transfer, inheritance and presents, the tax period is identified as each generation of income. - Social security and health insurance: These distributions are reduced from business income or salary, wages. - Family allowances: For taxpayers, the amount of monthly deduction is 4 million VND and each dependent is 1,6 million VND. - Charitable contributions: There is deduction applied for charitable contributions, with accordance to the international custom. - Tax rate: the law specifies 7 rates: 5, 10, 15, 20, 25, 30 and 35%. - Tax threshold: The tax threshold of 10 million is applied for income from copyright, franchising, prize winners, inheritance… These types of income also have the special tax rates. - Narrow tax base: This requires immediate acceptance for the benefit of the formalization of the labor market and the economy. - Non-resident individuals: the tax rates are applied variously to each business sector, the 20% tax rate for income from salary, wages; the 1%, 2%, 5% tax rate for business income.  New points compared to the Ordinance Compared to the Ordinance, the personal income tax law has many new points, progressive, consistent points with the international custom: 1) About taxpayers: Individuals with income from business, from transfer of land use rights, from salary, wages and other sources of income. Besides, the law added other taxable subjects which are individuals with income from 13 14 - Supplement “pensions voluntarily paid by pension fund monthly” to income that is reduced by personal income tax. Non-taxable types of income consist of social security, health insurance, unemployment insurance, professional liability insurance with some industries, sectors that require compulsory insurance, voluntary pension fund, charitable and humanity contributions. 3.1.1.2. Tax management law and law amending and supplementing of tax management Tax management law has become effective since 1/7/2007. Some notable points are: - Defining the rights of taxpayers in the process of tax calculation, tax audit, tax inspection and tax complaints, the tax agencies is obliged to compensate for the loss caused by the tax agencies; - Emphasizing the supply and use of one single tax code, the first step to a modern tax management system; - Harmonized rules on tax payment and tax refund. The penalty for paying late is 0,05% of the unpaid taxes for each day. The excess amount of tax will be repaid in a certain time. - It’s legal to get information from other agencies but the information must be kept confidentially. After a period of execution, the amending and supplementing of tax management law has become effective since 1/7/2013. The amended contents are split into 3 groups: The first group, simplifying administrative procedures of tax: reducing the frequency of declaration of value added tax for small and medium-size taxpayers; shortening the time of resolution of some administrative procedures. The group that serves the objectives of reform – modernization and integration, in conformity with the international custom, containing 4 contents: (1) supplementing the principle of risks management in the tax management; (2) supplementing the mechanism of advance pricing agreement (APA) in the anti-transfer pricing in the foreign-invested enterprises; (3) expanding the range of information gathering about taxpayers from foreign sources under the signed agreements and treaties in order to allow to extract data from foreign sources to serve the tax management; and (4) supplementing obligations of taxpayers in applying information technology to elevate corporate governance as well as to develop the method of electronic tax administration. The group that improves the efficiency of tax administration to conform to the actuality and to related legal documents to prevent budget revenue loss, reduce tax arears, containing 10 contents: the order of paying taxes and fines; the extension of tax payment; supplementing the regulation of paying tax gradually for taxpayers that are incapable of paying the full amount of tax at once; erasing tax debts, tax penalties; the enforcement of tax administrative decisions; the sanctions for violations of tax law; the time limit for handling violations of tax law; the tax audit at taxpayers’ headquarters; amending contents of tax administration to synchronize with other laws; becoming effective: the law became effective on July 1st 2013. 3.1.1.3. Survey on the impact of the policy change to taxpayers and comparison of tax rates between each policy change period The state budget obligations of each taxpayer reduce in the period of policy amendment The topic “The innovation of personal income tax policy in the actual conditions of Vietnam” has used the single model to determine the tax liability of each individual according to different income levels from 100 million/year (8,33 million/month) to 1,8 billion and 2,4 billion/year (150 million and 200 million/year respectively), based on the number of people who depend on the taxpayer’s nurture. The topic compares 6 ways: The first one considers the impact of the policy on single taxpayers; The second one considers the impact on taxpayers with one dependent; The third, fourth, fifth, sixth way, with 2, 3, 4, 5 dependents respectively (for example wife/husband, 2 children, 2 parents). 15 16 About the contribution to the state budget from personal income tax: the GDP grows annually, the income of workers also raise, so the personal income tax increases in both absolute and relative numbers every year. The data of the period 2009 – 2012 are described as follows: Chart 3.2. The average tax rate for each income level according to the Ordinance of 2004 and the Law of 2007 Amount of The average Amount of The average tax payable tax rate tax payable tax rate Total under the under the under the Impact under the income Personal Personal Ordinance Ordinance of income tax income tax of 2004 2004 law of 2007 law of 2007 30 0 0 0 0% 0% 90 3 1,1 -1,9 3% 1% 180 12 8,3 -3,7 7% 5% 330 45 31,6 -13,4 14% 10% 540 114 76,2 -37,8 21% 14% 810 222 147,8 -74,2 27% 18% 1200 378 273,5 -104,5 32% 23% 1500 498 378,5 -119,5 33% 25% 2000 698 553,5 -144,5 35% 28% 3000 1.098 903,5 -194,5 37% 30% (Source: Tax reform in Vietnam, World Bank, 2011) Thus, for an individual with one dependent, the personal income tax law of 2007 generates less revenue from tax than the Ordinance of 2004 in both absolute and relative terms. Chart 3.1. Personal income tax period 2009 – 2012 (Unit: Billion) PIT State GDP budget % of state budget Total % of GDP revenue revenue 2009 1.658.389 454.786 14.318 0.86 3.15 2010 1.980.914 559.170 26.288 1.33 4.70 2011 2.535.008 674.500 37.162 1.47 5.51 2012 2.949.000 41.500 49.190 1.67 6.63 (Source: The topic The innovation of personal income tax policy in the actual conditions of Vietnam) The figures above show that, in 2012 the total personal income tax revenue tripled the amount in 2009. The encouragement of tax rates in 2009 was 0.86% of GDP increased to 1.67% in 2012. Meanwhile, the proportion of personal income tax of the total state budget revenue raised gradually, from 3.15% in 2009 to 6.63% in 20124.  Comparison of the average tax rate and the progressivity of personal income tax law in 2007 with the Ordinance of 2004 To evaluate the impact of the personal income tax law of 2007 on the amount of tax that must be paid by an individual with one dependent, researcher calculates the tax duty of that person in 2 ways: (1) through the Ordinance of 2004 and (2) through the law of 2007, with different income levels (30 million to 3 billion VND). The results are as follows: 4 The tax revenue and GDP 2012 based on Publicizing the State Budget 2012, mof.gov.vn 17 18 In other research about the tax obligations of taxpayers with 2 dependents, with the income level between 30 million and 3 billion, the taxable income is deducted 86,4 million per year (instead of 67,2 million) and other types of income is taxed at the homogeneous floor rate of tax of 13,33% (the average tax rate in accordance with the personal income tax law of 2007 for income sources such as investments, copyright or real estate transfer). Located in the organization of state management, the organization of personal income tax administration is arranged from central (the Personal Income tax Management Department) to local (the Personal Income tax Management Department of the Department of Taxation, the Personal Income tax Management team of the Tax Offices ) and is decentralized in terms of function and mission clearly. Chart 3.3. Evaluation of the progressivity of the personal income tax law system of 2007 with the Ordinance of 2004 Chart 3.4. Amount of staff and civil servants in the organization of personal income tax law administration (up to December 31st 2010) Taxable Tax payable Other income Incom Total incom Salar e from inco e Law Law y busine Ordinan Ordinan me sourc 200 200 ss ce 2004 ce 2004 es 7 7 30 90 180 330 14 41 81 149 9 27 55 100 7 22 44 81 14 41 81 149 30 90 180 330 0,0 0,0 2,1 8,9 1,0 2,9 8,3 26,2 540 244 164 132 244 540 24,8 60,9 810 366 246 198 366 810 55,8 115, 8 210, 2 292, 3 440, 8 737, 9 Average tax rate La Ordinan w ce 2004 200 7 0% 3% 0% 3% 1% 5% 3% 8% 11 5% % 14 7% % 18 10% % 19 11% % 22 13% % 25 15% % 1.20 114,8 0 1.50 1500 677 456 367 677 169,0 0 2.00 2000 903 608 489 903 259,3 0 3.00 3000 1.355 912 733 1.355 440,0 0 (Source: Tax reform in Vietnam, World Bank, 2011) 3.1.2. The current situation of the organization of personal income tax management 3.1.2.1. Overview of the organization of tax administration in general The organization of state management of tax collection is established homogeneously from central to local administrative boundaries, perform the task of execution of tax laws in the country following the democratic centralism principle, assisting the Minister of Finance in the state administration of domestic revenues in the country, including: tax, fees, charges and other revenues of the State budget (referred to as tax). 3.1.2.2. The organization of personal income tax administration 1200 542 365 293 542 No. 1 2 3 Management level General Department of Taxation (Personal Income tax Management Department) Provincial, city Department of Taxation (59 Personal Income tax Management Offices) Tax Office (170 Personal Income tax Management teams) Total Unit People Amount 22 People 409 People People 575 1.006 (Source: The General Department of Taxation) 3.1.3. The actual status of the organization of personal income tax collection’s management 3.1.3.1. The propaganda and support of taxpayers The propaganda and support task of taxpayers is carried out frequently, continuously under various forms: pictorial, spoken, written press, direct consultation, reply in writing, opening electronic information page. The tax agencies pay careful attention to conversations with taxpayers; the initiative of organizing many “week of listening to taxpayers”, the timely resolution of arising problems are highly appreciated by the business community and the public. Any new tax policy is informed and guided at the right time, etc. In 2012, directly supported at the tax agencies to 185.157 taxpayers; supported through telephone to 224.014 taxpayers; replied in writing of 21.036 documents to taxpayers; organized 6.275 training workshop for 397.254 people; organized 3.602 dialogue conferences with 115.845 participants. The total amount of articles of the sector in the mass media is 12.562; the number of news related to tax on the radio and television is 215.731; hosted many press conferences; the General Department of Taxation has issued 965.326 documents, publications of propaganda to taxpayers; Departments of Taxation issued 686.972 documents, publications of propaganda to taxpayers. 19 20 3.1.3.2. The process and procedures of personal income tax declaration and payment ESTIMATION, SYNTHESI PROPAGANDA, SUPPORT, OSS, ADMINISTRATIVE CLERICAL SECTION - Propaganda tax base - Guide tax procedures - Provide reference to taxpayer Receive procedures of tax records TAX DECLARATION AND TAX AUDIT (INFORMATION PROCESSING) Tax registrationStorage of taxpayer’s informationProcess tax declaration forms, tax documents - Tax accounting - Debt calculation - Process tax refund TAX INSPECTION, TAX AUDIT AND PIT - Tax - Tax - TAXPAY ERS DEBT MANAGEMENT AND TAX COERCION records of taxpayers declaration examining Risks analyzing Choose tax records to inspect and audit Create inspection and audit records Manage records 3.1.3.3. Managing the personal income taxpayers: The situation of collecting and paying the personal income tax conformity to income groups: Based on the reports of the General Department of Taxation, the situation of collecting and paying the personal income tax conformity to income groups is as follows: Chart 3.5. The situation of collecting and paying the personal income tax conformity to income groups TREASURY - Debt analysis - Debt notices - Apply debt collection measures - Coercive debt Chart 3.6. Opperating model of current tax management (Source: The General Department of Taxation) In this chart, the Opperating model of current tax management through the general process for taxpayers with the production and business activities is described as follows: Taxpayers register tax declaration, submit tax declaration form, tax records at the propaganda and support section (OSS) of the tax agencies and pay taxes at the State Treasury. The propaganda and support function are there to help taxpayers; the information processing function run by the tax declaration and tax audit section is the action of importing information of tax declaration, issuing tax code; this section executes the tax administration through examining the tax declaration form, determining taxable base, comparison of the tax declaration form, determining the taxable amount; processing tax collection documents, determining the amount of tax paid and the tax arrears, etc. The processes in each tax management function is described according to the workflow, determine the responsibilities of each section of the tax agencies, pay special attention to the application of information technology. Tax level Proportion of taxpayer Proportion of amount of tax collected 10,6 10,8 13,2 15,1 19,5 11,8 17,3 1 73,0 2 11,5 3 6,5 4 3,05 5 1,75 6 0,65 7 0,18 (Source: The General Department of Taxation) Depending on the data above, the subjects of level 1 occupy 73%, but the amount of tax paid is only 10,6%. In the meantime, although the subjects of level 7 occupy only 0,18%, the amount of tax paid reaches 17,3%. Thus, raising the level of family allowances has helped a large part of taxpayers to move to the area of non-taxable subjects, the tax management costs will reduce significantly. 3.1.3.4. Tax debt management The tax arrears management’s duty is to ensure the timely collection of the tax debt to the State Budget, to minimize the newly arised tax debt, to prevent revenue loss. At the end of 2012, the ratio of debt to total state revenue was about 8%, increased 27,5% compared to 2011, this is consistent with the actual situation, as the economic state is struggling with many difficulties, inventories rise, the production and business stagnate. However, the scale of tax debt of 2012 was lower than that of 2008 (equivalent to 9,5%). 3.1.3.5. The application of information technology in the management of tax collection 21 22 Specify the creation of a management mechanism towards taxpayers, support thoroughly to enhance the voluntary compliance of taxpayers, elevate the effectiveness of the tax administration, in the meantime improve drastically the internal operating capacity of the system and the thought of serving of tax officials, improve the ability of tax management, the tax service has opted for an innovative solution based on the information technology, in parallel with the creation of a national integrated database, to serve the data processing, build the tax management model according to international standards. The application of technology of the General Department of Taxation is highly valued in the reduction of procedures and costs for corporates, is consistent with the economic integration, contributes to creat fundamental changes in the tax declaration procedure, brings great efficiency for both corporates and tax authorities, reduce the disadvantage of time, effort, creat initiative for corporates. Apart from the advantages that the electronic tax declaration produces, this method also has its inadequacies: hard to find out errors, corporates don’t know where to correct, while the tax authorities can’t support them directly; the technology infrastructure, softwares, human resources remain weak; most corporates have a habit of declaring tax through the internet near the due date, etc. Despite many efforts reflected in the collection and analysis of data related to taxpayers to evaluate the compliance level, classify risks and create the list of taxpayers whose tax records need to be audited, the tax inspection and audit still has many flaws pointed out by the World Bank. Right in the directing, the absence of any material that synthesizes separately the results of the personal income tax inspection is also a defect. 3.2. Overall assessment of the actual situation of state management of personal income tax in Vietnam 3.2.1. Achievements of state management of personal income tax 3.2.1.1. Rapid growth of revenue, increases proportion of total budget revenues, contributes to extend the revenue sources to the state budget Although the real tax threshold has increased since 2009, the revenues have continued to increase year after year, remains a constant growth rate, until 2012 the revenues increases 725,3 times compared to 1991 (from 62 billion to 46.333 billion), details as follows: 3.1.4. The actual situation of personal income tax inspection, tax audit The inspection and audit function plays an important role in the tax management. Tax inspectors detect and prevent the non-compliance, and also explain complicated codes during the process of auditing, convince taxpayers to observe the laws. The inspection and audit of personal income tax settlement is carried out along with the inspection and audit of corporates and agencies. In 2012, the tax service inspected and audited 55.849 corporates (achieved 87% of the plan and 111,2% in comparison with the same period of 2011); collection of arrears and penalties of 12.541 billion (167% compared to the same phase of 2011); inspected 7.038 corporates (reached 90,1% of the plan and 115,4% compared to the same period); collection of arrears and penalties of 6.000 billion (176% related with 2011); audited 48.811 corporates (86,1% of the plan and 110,7% related with 2011); collection of arrears and penalties of 5.441 billion (133% related with 2011); Additionally, audited 1.930.476 tax records at the headquarters of tax agencies (105,5% related with 2011), adjusted revenue increase 1.100 billion (142% related with 2011). Chart 3.3. Personal income tax revenues from 1991 to 2012 (Source: The General Department of Taxation) 3.2.1.2. Elevating the sense of responsibility, the voluntariness, creating the habit of fulfilling tax duty for taxpayers a) Elevating the sense of responsibility, the voluntariness, creating the habit of fulfilling the personal income tax duty for taxpayers: Methods of propaganda of tax policy on the mass media have gained good results. Many taxpayers are aware of the personal responsibility to the State. b) The tax administration law and the mechanism of self-declaration, selfcalculation and self-payment have brought great efficiency since in this mechanism, taxpayers are completely active in the implementation of budget obligations. 3.2.1.3. Redistribution and gradually managing residential income, contributing to the social justice 23 24 a) Redistributing the income, contributing to the social justice: The personal income tax policy lately is an important tool to adjust, redistribute income, gradually narrow the gap between the rich and the poor in the society, towards social justice according to the policies of the Party and the State. b) Managing the income of residents through managing taxpayers: The organization of management of personal income tax collection in the past few years has helped the State to administrate gradually the income of residents. 3.2.2. The inadequacies of state management of personal income tax 3.2.2.1. Inadequacies of policy: a) Limited and not really fair tax base b) Unfeasible regulation with the stock dividend c) Tax of real estate transfer still has flaws 3.2.2.2. Inadequacies of tax collection management mechanism a) Vietnam’s rank is very low in the business environment report through the target of tax payment b) The assessment of business processes through the review of 15 operational functions and the inadequacies without standard procedures for PIT c) Regulations on household business management contain many shortcomings d) Regulations on tax collection at sources, complex tax skills cause difficulties in the implementation process e) The inspection, audit, propaganda and education with inefficiency 3.2.2.3. Some assessements of taxpayers on inadequacies of personal income tax (through investigation and survey practice) 1) The influence of the policy - The level of tax regulation With the level of personal income tax regulation, 51% of people questioned assume that the amount of tax payable is high, 26% suppose that is too high, only 22% of taxpayers thought it’s an adequate amount. These ratios in personal income tax respectively are 51%, 26% and 22%. - The level of time and cost waste for the completion of tax declaration and tax payment According to results of the investigation, it seems that taxpayers consider the waste of time and cost for the completion of tax declaration and tax payment are an ordinary thing. 43% think the time and the cost of personal income tax declaration and tax payment are reasonable; 26% consider it is high and only 18% consider it is very high. The frequency of tax declaration 2/3 of the opinions state that the frequency of personal income tax is acceptable (65%) while 33% of taxpayersthink that it’s too high. - The impact of the actual tax policy on corporates The results reveal that taxpayers’ reaction is not positive. Evaluation of personal income tax: 13% of people assume that affect corporates positively, nearly a half (47%) suppose it’s not significant, 35% think it’s negative and 6% consider it is extremely negative. With the opinion on the heavy level of regulation, those negative comments about the bad influence of tax on taxpayers show that the tax policy is in need of alterations. 2) Other factors There are many factors that affect to the tax compliance, the observance of tax law obligations of both tax authorities and taxpayers since this is a complicated matter, including the tax registration, declaration, report, payment of taxpayers in the support and supervision of tax authorities. Those are: the socio-economic situation, tax policy, administrative capacity of tax authorities, factor emerged from taxpayers themselves… 3.2.3. Causes of inadequacies Firstly, the lack of the system of legal regulations necessary for income transparency Secondly, people are not used to personal income tax Thirdly, quantitative standards haven’t been applied yet for the evaluation of personal income tax management’s effectiveness Chart 3.8. Calculation details of the target of tax payment over the years Tax and other compulsory payments during the year Times of payment Time of implementation per year of tax obligations Total tax rates (% profit) 2009 – 2012 2009 2010 2011 2012 2009 2010 2011 2012 Social security Health insurance Unemployment insurance Corporate income tax Income tax from land use rights transfer Excise Fuel cost VAT Total 12 0 400 400 372 372 16.9 2.3 16.9 2.3 16.9 2.3 18.0 3.4 350 350 233 233 19.2 19.2 1.1 11.6 1.1 16.0 1.4 0.2 0.2 1.4 0.2 0.2 0.9 0.2 0.2 1.3 0.2 0.2 40.1 40.1 33.1 40.1 0 5 1 1 1 12 32 300 1050 300 1050 Source: http://www.doingbusiness.org 336 941 336 941 25 26 Fourthly, the training of tax staff remains ineffective; the coordination between authorities is not regular and close and recovery of environment; the population has access to clean water; centres of production have to apply clean technology. 4.1.2. Oriented perspectives 4.1.2.1. Perspectives of policy construction - Reduce tax rates and expand taxable subjects. Increase space between levels of taxable income, remove the amount of tax levels and decrease tax rates. - Modify taxable income threshold and family allowances to be consistent with Vietnamese practice. - Review taxable income sources, family allowances to be appropriate to the situation in Vietnam, ensure simplicity, easy to implement and reduce the tax cost. Meanwhile, in the amendment, the construction of personal income tax law, the State always pays attention to: a) Guarantee justice in personal income tax management, limit the income gap between the stratas b) Ensure the proper encouragement of citizens’ income, encourage every individual to work, to do business, to increase income and enrich legitimately c) Suitable with the country’s situation and international custom; selective inheritance of regulations in the current tax policy d) Ensure the mobilization of resources for the State to resolve social matters better 4.1.2.2. Perspectives on implementation of personal income tax law and reform of tax collection management Tax management reform to strengthen the stability of the macroeconomy and the structure of tax system for a more effective tax collection and tax administration. The perspective of tax management reform is modernized entirely in the management method, the organization of tax authorities, the staff and the facilities are improved, ensure the effectiveness in tax administration, minimize tax loss, ensure the correct, full and timely tax collection to the state budget, the sense of tax law compliance of taxpayers is also elevated. Tax management reform should be associated with boosting administrative tax procedures reform according to the scheme 30C of the government, regularly monitor and control timely tax administrative procedures. To reform, it’s necessary to learn international experience related to the tax administration, promote tax cooperation with tax authorities of other countries and global organizations. 4.2. Some basic solutions of completing state management of personal income tax in Vietnam 4.2.1. Solutions of legal framework 4.2.1.1. Tax policy reform CHAPTER 4 SOLUTIONS TO COMPLETION OF STATE MANAGEMENT OF PERSONAL INCOME TAX IN VIETNAM 4.1. Some oriented perspectives to complete state management of personal income tax in Vietnam 4.1.1. The basis for the proposition of perspectives 4.1.1.1. The socio-economic situation Achievements: The average economic growth rate of 5 years 2006 – 2010 reached 7%. GDP of 2010 at current prices was 101,6 billion USD, 3,26 times higher than 2000; GDP per capita is 1.168 USD. Total investment capital is 2,5 times higher in comparison with the phase 2001 – 2005, reaches 42,9% GDP, total FDI obtained nearly 45 billion USD, exceeded 77,8% of the plan. The economic structure shifts positively towards industrialization, modernization that leads to labor structure’s shift: the proportion of industrial sector in GDP increased from 41% to 41,1%; service sector from 38% to 38,3%; agricultural sector dropped from 21% to 20,6%; the labor structure in agriculture reduced from 57,1% to 48,2%; in industry and construction from 18,2% to 22,4%; in service from 24,7% to 29,4%. 4.1.1.2. The socio-economic development goals In economy: Striving for the growth rate of GDP averagely of 7 – 8% per year. GDP of 2020 at comparative prices is 2,2 times higher than 2010; the average GDP per capita at current prices reaches 3.000 USD. The proportion of industrial and service sector occupies approximately 85% of GDP. The value of high technology products and products of high technology application is nearly 45% of total GDP. The value of product manufacturing occupies roughly 40% of total value of industrial production. The agriculture is modern, effective, sustainable, many products have high value added. The labor structure shifts positively: the rate of agricultural labor is nearly 30 – 35% social labor. The aggregate productivity factor that contributes to the growth reaches 35%; reduction of energy waste based on GDP 2,5 – 3% per year. Saving in the use of all resources. The infrastructure is relatively synchronous, with some modern buildings. The ratio of urbanization reaches beyond 45%. The amount of communes qualified for new rural community’s standards is almost 50%. In culture, society and environment: Building a society of democracy, discipline, consensus, justice and civilization. Until 2020, the net income of the population will be 3,5 times higher than that in 2010; the rate of solid houses is 70%, averagely 25 m2 per citizen, the ratio of forest area reaches 45%; education and training, science and advanced technology; improves the quality 27 28 a) Proposing the personal income tax law of 2017 with 4 levels of tax rate Chart 4.1. Tariffs according to the Amending tax law of 2017 Tax level 1 2 3 4 Chart 4.4. Tax payable of taxpayers without dependents Taxable income part/year Taxable income part/month Tax rate (million) (million) (%) To 120 To 10 3 From 120 to 600 From 10 to 50 10 From 600 to 1080 From 50 to 90 20 Over 1080 Over 90 30 Within the framework of the thesis, the author uses the model of evaluating the impacts of the budget collection on inviduals without dependents with the following data: Chart 4.2. Difference between tax payable of taxpayers without dependents 2017 Tax payable (million) Income (million) 100 200 400 600 800 1,000 1,400 1,800 2,000 2,200 2,400 Current law Proposed law of 2017 0.0 4.3 31.0 69.8 115.0 168.9 287.5 414.2 477.5 540.9 604.2 0.0 2.2 17.0 35.1 54.8 91.0 171.3 279.9 334.2 388.5 442.8 Difference of tax payable 0.0 -2.1 -14.0 -34.7 -60.2 -77.9 -116.2 -134.3 -143.3 -152.4 -161.4 b) Proposing the tax reform of 2022 with 2 levels of tax rate and elevate the family allowances threshold Chart 4.3. Tariffs according to the Amending tax law of 2022 Tax level 1 2 Taxable income part/year Taxable income part/month Tax (million) (million) (%) To 240 To 20 3 Over 240 Over 20 20 Evaluating the impact of budget collection through single model: rate Tax payable (million) Income (million) 100 200 400 600 800 1,000 1,400 1,800 2,000 2,200 2,400 Difference of tax payable Amended Amended Amended 2022 related to 2022 related to law 2012 law 2017 law 2022 2012 2017 0.00 4.30 31.00 69.75 115.00 168.90 287.45 414.15 477.50 540.85 604.20 0.00 2.19 17.00 35.10 54.80 91.00 171.30 279.90 334.20 388.50 442.80 0.00 0.00 4.74 27.00 63.20 99.40 171.80 244.20 280.40 316.60 352.80 0.00 -4.30 -26.26 -42.75 -51.80 -69.50 -115.65 -169.95 -197.10 -224.25 -251.40 0.00 -2.19 -12.26 -8.10 8.40 8.40 0.50 -35.70 -53.80 -71.90 -90.00 4.2.2. Solutions of the organization Firstly, building the personal income tax management organization with the model of centralized data processing center Secondly, strengthening the organization of tax collection management towards enhancing power, responsibility and efficiency of tax authorities of all levels Thirdly, reinforcing training and improving the level of tax officials in all aspects 4.2.3. Solutions of personal income tax collection management Firstly, intensifying the propaganda, education and providing the service of supporting taxpayers to elevate the voluntariness and possibility of taxpayers Secondly, reforming tax procedures and the process of tax management methods consistent with the management model and the method of selfdeclaration, self-calculation and self-payment Thirdly, improving the electronic management with the application of high technology, accelerate the progress of implementing the project of electronic tax declaration, tax payment through executing the integrated tax administration information system (ITAIS) that works properly, successfully consolidates with the project of the personal income tax management software 4.2.4. Solutions of tax inspection and tax audit - About the inspection and audit of taxpayers - Organizing and decentralizing the internal inspection and audit - About the conditions of support - Enhancing the function of tax authorities to be empowered to investigate, prosecute. 29 - Establishing the section of resolution of complaints about tax at the central and local tax authorities 4.2.5. Other solutions Firstly, the policy system of social-economic management must be reformed synchronically to create the base for the personal income tax collection management Secondly, creating the route for the implementation of solutions Thirdly, exchanging information between the tax authorities and social security Fourthly, analyzing the tax collection management mechanism depending on the method of cash flow management CONCLUSION Within the research range, the thesis has resolved these basic issues: Firstly, collecting, analyzing the theoretical issues of the state management of personal income tax. Secondly, consulting experience of state management of personal income tax of other countries, comparing to the international studies to learn the lesson for Vietnam Thirdly, generalizing the completion process of the state management of personal income tax in Vietnam, making assessments about achievements and restrictions. In the meantime, indentifying the origin of inadequacies to create a base for suggestions of solutions to complete the state management of personal income tax in Vietnam in the future.
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