The Vietnam Chamber of Commerce and Industry (VCCI) has recently sent its comments on the draft Value Added Tax (VAT) Law to the Ministry of Finance. According to VCCI, the draft has raised the tax-exempt revenue threshold for households and individual businesses from VND 100 million per year to VND 150 million per year.
This provision will exempt many small-scale individual businesses and households from the obligation to declare and pay taxes. However, according to feedback from many businesses, the taxable revenue threshold of VND 150 million per year is still relatively low.
VCCI explains that comparing the treatment of individual business owners and salaried employees reveals an inconsistency. Currently, salaried employees are entitled to a deduction for family circumstances: VND 132 million per year for those without dependents, VND 184.8 million per year for those with one dependent, and VND 237.6 million per year for those with two dependents.
“Assuming the average worker has one dependent, the taxable income threshold for salaried employees is higher than the taxable revenue threshold for individual business owners. Moreover, to generate revenue, individual business owners will have to bear costs that salaried employees do not have to incur,” VCCI states.
VCCI proposes raising the VAT taxable revenue threshold for business households. (Illustrative image)
According to VCCI, different industries have different cost structures and tax rates, even if they may have the same amount of revenue. For example, in the retail sector (such as retail stores and grocery stores), the input costs account for a large proportion of revenue, and the amount of income that individual business owners receive is not significant, with only VND 1.5 million in taxes paid each year.
In the service sector, where input costs are negligible, the value added is higher and the taxes paid are higher, starting at a minimum of VND 7.5 million per year.
Based on the above reasons, VCCI proposes that the drafting agency consider amending the provisions on the taxable revenue threshold for households and individual business owners by raising the threshold to around VND 180 – 200 million per year.
VCCI also proposes that the Ministry of Finance consider classifying industries in a similar manner to direct tax calculation methods, such as the distribution and supply of goods having a higher threshold than the service sector, construction, etc.
According to the General Statistics Office, there are currently about 5.5 million business households in the country, contributing 30% to the GDP each year.
