According to the latest data from the General Department of Taxation, as of November 13, 2020, the total revenue from personal income tax (PIT) reached more than VND100,413 billion (equal to 78.06% of the estimate). The PIT collection rate is on a downward trend due to objective factors. When overcoming this difficult period, the Tax Agency expects that PIT will make a greater contribution to the state budget revenue, because the economy grows, so people's income will as well.

As of November 13, 2020, total revenue from PIT reached more than VND100,413 billion
(equal to 78.06% of the estimate). Photo: Thuy Linh

PIT reduces sharply

According to the General Department of Taxation, amid the Covid-19 pandemic affecting all socio-economic aspects of our country, the PIT revenue still witnessed a slight increase of 4.35% year-on-year. However, the PIT collection rate in the first ten months of 2020 dropped by 13.45% year-on-year. Of which, the biggest drop was the PIT revenue from salaries, wages and the PIT revenue from individual production and business activities (which are the main sources of PIT revenue) from the second quarter of 2020.

The General Department of Taxation explained that ofthe total revenue in the first ten months of 2020, the increase in revenue was mainly due to the revenues from 2019 which were paid in the first quarter of 2020 (an increase of 17.2% over the same period last year). This was due to the relatively good economic situation in 2019; employees received high incomes before and after the Lunar New Year 2019. At the same time, the growth of the real estate market and the flourishing of the stock market had a positive impact on PIT in the first quarter. For example, income from wages in the first quarter increased by 19.1%; income from capital investment increased by 15.2%; income from business activities of individual households increased 6.4%; and income from real estate transfer increased by 6.1%.

However, from March 2020 when the Covid-19 pandemic broke out in Vietnam and social distancing was applied in April, business activities decreased, so many enterprises reduced salaries and wages, employees were put on alternate leave and individual business activities stalled.

At the same time, the extension of PIT payment for business households and individuals according to Decree No. 41/2020 / ND-CP made PIT revenue from the second quarter of 2020 to the end of October 2020 only equal to 97.38% over the same period in 2019. In which, the PIT revenue from salaries and wages and PIT revenue from production and business activities of individuals (which are the main sources of PIT) were only 94.39% and 92.88% respectively year-on-year.

About one million people will not have to pay PIT

The General Department of Taxation said that another reason affecting the PIT revenue this year is that on June 2, 2020, the National Assembly Standing Committee issued Resolution No. 954/2020 / UBTVQH14 on changes to the PITexemptions. According to the General Department of Taxation, with the new exemptions, about one million people who are paying PIT at the first level (level 1) will no longer have to pay. Those with higher income,who are payingPIT in the range of level 2 onwards, will be benefited when their PIT significantly reduces by increasing the exemptions.

This policy has been in effect since July 1, 2020, thus affecting the PIT revenues from salaries and wages from August 2020. Specifically, the revenue from salaries and wages in August 2020 was VND4,564 billion equivalent to 93.2% of the same period in 2019; revenue from salaries and wages in September 2020 was VND4,123 billion, equivalent to 92.74% of the same period in 2019 and revenue from salaries and wages in October 2020 was VND 6,759 billion, equivalent to 90.17% of the same period in 2019.

Looking at the above data, it can be seen that the Covid-19 pandemic has reduced people's income, which leads to a decrease in the PIT revenue of the tax agency. However, the increase in taxable income from VND9 million /person / month to VND11 million / person / month, and increase the exemption from VND3 million / person / month to VND4 million / person / month has made many people subject to PIT not have to pay tax.

This benefits taxpayers and helps them overcome difficulties caused by the pandemic and also shows the Government's attention to employees who are fulfilling their PIT obligations.

For a developing country like Vietnam, PIT will become increasingly important, accounting for about 25% of total budget revenue. Therefore, the increase in PIT revenue in Vietnam is based on the progress of economic development. The General Department of Taxation affirmed, overcoming the current difficultiescaused by the impact of objective factors, the PIT in Vietnam will likely reach the rate of 20-25% of the total budget revenue. This uptrend is inevitable.

The PIT collection rate from salaries and wages; from production and business activities of individuals; real estate transfers, inheritance and gifts as real estate; from winning prizes; from copyrights, franchises; from inheritance, gifts, and other gifts except real estate; from property leasing and from securities transfer decreased from 0.57 to 27.79% year-on-year. Of which, PIT revenue from salaries and wages as of November 13 reached more than VND72.5 billion, the collection rate fell to 17.81%. At the same time, the PIT collection rate from property leasing also dropped by nearly 27.8%.