Income tax plans find little favour

PUBLISHED : Thursday, 09 March, 2006, 12:00am
UPDATED : Thursday, 09 March, 2006, 12:00am

For the first time, most citizens will pay

Having survived war and decades of poverty, Vietnamese citizens are now facing a more common scourge: income tax.

Vietnam's Ministry of Finance has announced plans to eliminate the minimum salary level, currently about US$325 a month, at which income taxes are payable.

The move means income taxes will now be payable by most of the population for the first time. Small salaries, unreported income and tax evasion means that less than 5 per cent of the workforce currently pays income tax.

The prospect of paying the taxman is proving no more popular in Vietnam than it is anywhere else - especially because of the common belief that state funds are routinely misused through corruption and waste.

'I don't want to pay a part of my money that I have to work hard for to corrupt government officials,' said one Hanoi man, a sales executive with a car company, who asked not to be named.

The Finance Ministry would not confirm the plan, saying nothing had been finalised yet.

Observers say the Vietnamese government is looking for more sustainable sources of revenue. Untaxed personal incomes are steadily on the rise, although the average annual income is estimated at less than US$1,000 per year. Currently state revenues rely heavily on fluctuation-prone duties and exports, especially of crude oil.

The fast-developing country also aims to brings its tax policies in line with those of most of the rest of the modern world, analysts say, thereby introducing the concept of stakeholding taxpayers. Few citizens view the government's budget as truly being the public's money.

'Most Vietnamese regard income tax as non-existent, or someone else's problem,' said Thanh Nguyen, a managing partner with Ernst & Young Vietnam.

'By bringing more people into the tax net, more people become taxpayers [and so] become stakeholders in the country's taxation, including how the money is spent.'

While experts say the move is a necessary part of Vietnam's transition to a market economy, they agree that implementation will be a long and arduous process. Most workers are paid in cash and bookkeeping is sporadic.

'People need to learn that [paying taxes] is civilised behaviour in a market economy,' said Vo Tri Thanh, an economist with Hanoi's Central Institute of Economic Management.

'But how to convince the public of this will be a problem.'