Associate Prof Phan Huu Nghi, Deputy Director of the Finance and Banking Institute at the National Economics University, said the current progressive personal income tax table includes seven brackets, with rates from 5 percent to 35 percent. However, the gaps between them are too narrow, causing tax rates and amounts to rise quickly even with slight income increases.

This system pushes middle-income earners into higher tax brackets, creating significant financial pressure and reducing work motivation.

Nghi believes that the reasonable reform option is to adjust the gaps between tax brackets. Spacing them out using a rational coefficient, such as a coefficiency of 2, would make the tax system more stable, increase its flexibility, encourage income growth, and prevent the unreasonable situation where middle-income workers still face high tax rates.

Additionally, the number of tax brackets could be reduced from 7 to 5, simplifying the tax calculation system while still ensuring reasonable revenue for the state budget.

He proposes adjusting the tax schedule as follows:

Tier 1: Income VND0-10 million, tax rate 5 percent.

Tier 2: VND 10-30 million, 10 percent.

Tier 3: VND 30-70 million, 15 percent.

Tier 4: VND 70- 50 million, 20 percent.

Tier 5: above VND150 million, 25 percent.

According to Nghi, this adjustment would make the tax system fairer, reduce financial pressure on workers, and still secure budget revenue.

Nghi believes that the maximum tax rate in Vietnam should be capped at 25 percent, especially given the context of relatively low average income and an economy that still needs accumulation and investment. Currently, the corporate income tax (CIT) stands at 20 percent, so a reasonable personal income tax rate would further motivate workers.

"Later, when average income reaches a higher level, we can consider increasing taxes," Nghi said.

Sharing the same view, Nguyen Thi Cuc, Chair of the Vietnam Tax Consultants' Association (VTCA), said the current highest tax rate of 35 percent places a significant financial burden on high income earners. She proposes eliminating this rate and adjusting the gaps between tax brackets to reduce tax pressure and ensure greater fairness among income groups.

How much is considered ‘high income’?

Nghi emphasizes that tax deductions are a crucial factor in the PIT system, as they directly affect the number of taxpayers and the amount of tax payable.

According to Nghi, when determining taxable income, essential costs to generate that income should be considered, including daily living expenses (commuting, food, labor production) and past expenses like education and training. However, the current tax system does not fully reflect these factors, resulting in taxation that is not truly fair for workers.

One of the major problems under discussion today is the family circumstance deduction. Currently, this deduction is applied uniformly nationwide, regardless of differences in living costs between provinces and cities. 

Nghi argues that to develop a reasonable tax policy, specific data on workers' income distribution is needed. Estimates suggest that the income group of VND18-23 million per month ($8,400-10,500 per year) currently accounts for the largest proportion of the workforce.

"When designing tax policy, we need to determine what income level is truly considered high. If this threshold is set unreasonably, it could lead to the middle-income group—which forms the majority—being heavily taxed, creating significant financial pressure," he warned.

Thus, he proposes raising the income level subject to PIT to VND20-25 million per month, better reflecting actual income conditions and avoiding a negative impact on the middle class. At the same time, a tax policy should be designed in a way to ensure effective management over ultra-high-income earners to ensure fairness of the tax system.

Furthermore, determining the family circumstance deduction should be based on factors such as the consumer price index (CPI, income), per capita, and the minimum wage. If these indicators rise significantly, the deduction should be adjusted accordingly rather than remaining fixed for extended periods.

Le Xuan Truong, Tax Department Dean at the Academy of Finance, believes that in the next five years, Vietnam will remain a developing country with a middle income, necessitating a relatively high family circumstance deduction relative to GDP.

He suggests that the deduction for taxpayers should be around 1.5 times of GDP per capita. When compared to GDP at purchasing power parity (PPP), this level is only about 0.6 times, the same as other countries with a similar development level. 

Tuan Nguyen