Article 22, Clause 2 of the PIT Law sets a progressive tax schedule for income from salaries and wages, with seven brackets: 5 percent, 10 percent, 15 percent, 20 percent, 25 percent, 30 percent, and 35 percent.

In the draft new PIT Law, MOF suggests two options to revise the progressive tax schedule by reducing the number of brackets and widening the income thresholds.

In both options designed by MOF, the minimum tax rate of 5 percent applies to taxable monthly income of VND10 million (after family deductions for dependents and other expenses). The maximum tax rate is 35 percent for taxable income above VND80 million (Option 1) or VND100 million (Option 2).

Le Thi Thuy, CEO of Bach Khoa Consulting Services Co., Ltd., noted that the current seven-bracket system, with income thresholds differing by just VND5 million, results in frequent jumps between brackets.

Thus, in the draft law, MOF’s proposal to reduce to five brackets shows responsiveness to public feedback.

Though both options feature five brackets with a maximum rate of 35 percent, Thuy favors Option 2, as it provides a more reasonable spread of tax brackets compared to Option 1.

“Some countries also apply a top rate of 35 percent, like Vietnam, and others even higher. However, in countries like the US, taxpayers benefit from deductions for various living expenses, whereas Vietnam allows fewer deductions,” Thuy explained.

Nguyen Van Duoc, Head of Policy at the HCMC Tax Consulting and Agency Association and General Director of Trong Tin Accounting and Tax Consulting Co., Ltd., supports reducing to five brackets, as it simplifies and streamlines the tax system.

However, Duoc is inclined towards option 2, because this option has a slower jump for levels 2 and 3 and the tax threshold of 30 percent starting from 100 million VND will be more reasonable.

Abolishing 35 percent tax rate?

Duoc suggests abolishing the 35 percent tax rate. “My personal view is that the 35 percent rate should be removed. Currently, taxpayers feel the tax burden is too high, which discourages wealth creation and motivation to strive.”

He believes that maintaining such a high tax rate not only fails to encourage development but also leads to negative consequences like fraud and tax evasion.

“Reducing the top rate to 30 percent would encourage transparent wealth creation, reduce negative behaviors, and, in the context of globalization, create a more competitive labor environment to attract and retain high-quality talent, preventing ‘income leakage’ abroad,” Duoc said..

He also proposes a bolder reform for the first and second brackets.

“If possible, widen the first and second brackets. For example, apply a 5 percent rate for income up to VND20 million, then 15 percent for income from VND20 million to VND40 million, skipping the 10 percent bracket. Then, design the third, fourth, and fifth brackets scientifically,” Duoc suggested.

According to him, restructuring the lower brackets would reduce the burden on the majority while reflecting the true purpose of PIT.

“The goal of PIT is to collect from high earners for redistribution. Reducing the burden on lower brackets, though it may slightly reduce revenue, will be offset by greater transparency and compliance at higher brackets. This supports workers and makes tax policy fairer and more effective,” Duoc said.

Deductions for medical, educational expenses 

In the draft law, under consultation, MOF proposes adding specific income deductions.

The ministry suggests allowing taxpayers to deduct expenses for medical care and education for themselves and their dependents (parents, spouse, or children) before calculating taxable income.

The scope and extent of these deductions require careful consideration to balance support for taxpayers with the income-regulating and redistributive role of personal income tax policy.

Thus, the drafting agency proposes delegating detailed regulations to the government to ensure flexibility and alignment with socio-economic conditions.

The Ministry of Finance’s proposal stems from numerous suggestions to allow deductions for expenses incurred during the year, such as medical and educational costs, to reduce financial burdens and improve access to essential services.

Also, international practices show that most PIT laws include provisions for family circumstance deductions in various forms and methods. Countries typically apply these deductions in three groups: general deductions for individual taxpayers, deductions for dependents, and deductions of a specific nature.

Nguyen Le