separate laws for humanitarian purposes, aiming to support people's lives, reducing difficulties for taxpayers. In the period of international economic integration, tax exemption and reduction are preferential measures, encouraging the development of domestic production when tariff barriers are abolished. However, tax exemption and reduction also has two sides, it contains positive factors, creating conditions for implementing the State's socio-economic policies but also contains negative factors, which can distort the original ideas when establishing tax policies, not in accordance with the standards of a modern tax system.
About family deduction
Most countries have provisions on family deductions, the clearest manifestation of horizontal fairness in income regulation. With the same income, people in more difficult circumstances (for example, having many people to support, being disabled, etc.) need more deductions than people with favorable conditions. Experience drawn from countries around the world can be drawn in two ways: personal deductions and standard deductions. As a developing country, Vietnam chooses to apply the standard deduction to ensure the simplest calculation based on the income and expenditure structure of the population. The law stipulates a fixed family deduction amount for each taxpayer and each dependent.
1.2.3.6. Tax management law on tax audit, tax inspection and handling of violations of personal income tax law
On personal income tax inspection and examination
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The law on tax inspection and examination is an important part of the law on tax management. In the overall management of personal income tax collection, personal income tax inspection and examination is extremely important. Personal income tax inspection and examination activities are understood as the supervision activities of tax authorities on transactions related to the origin of tax obligations, the implementation of tax administrative procedures, and the compliance with tax payment obligations of each individual. Personal income tax inspection and examination aims to assess the completeness, accuracy, and honesty of the documents and records that taxpayers have declared, submitted, and presented to tax authorities; at the same time, assess the level of
compliance with tax laws of both taxpayers and tax officials, detecting violations. Thereby, ensuring effective enforcement of personal income tax laws, preventing illegal acts of personal income tax payers.
On handling violations of personal income tax laws
Handling tax violations is a step in the tax management process in general and personal income tax in particular. Handling violations of personal income tax law can be understood as the competent authority deciding to apply appropriate sanctions to organizations and individuals who violate personal income tax law based on current legal regulations. All violations of tax law must be detected and strictly handled. Depending on the nature and severity of the violation, each taxpayer will be subject to different sanctions to ensure that tax law is implemented thoroughly and fairly.
1.2.3.7. Tax administration law on the enforcement of administrative decisions on personal income tax administration
Enforcement of administrative decisions is the final step in the general tax management process and the personal income tax management process in particular, demonstrating the power of the state through the enforcement mechanism and compulsory compliance. Tax administrative enforcement measures are applied to acts that have not yet reached the level of being handled by criminal measures. In cases where a person has been prosecuted for tax evasion, the enforcement of tax administrative decisions will no longer be applied. The collection of tax evasion will be decided by the court in the judgment. If tax administrative decisions are enforced promptly and handled correctly, it will help ensure a stable source of revenue for the state budget.
1.2.3.8. Tax administration law on IT application in personal income tax management
While the number of taxpayers is increasing, the sources of taxable income are diverse and the industry's human resources are limited, the application of IT in personal income tax management in recent years has clearly demonstrated its advantages. Thanks to the widespread application of electronic services in all stages, tax administrative procedures have been simplified much more than before, reducing costs.
unnecessary for taxpayers, optimizing the management process. Currently, taxpayers can access the National Public Service Portal to perform electronic tax payment procedures and conduct tax registration, tax declaration, tax payment, and tax refund on the General Department of Taxation's Electronic Information Portal. In addition, the tax sector also deploys the Centralized Tax Management System (TMS) to support 63 tax departments and tax branches in management work. However, managing large data sources is also a challenge for the tax sector when legal policies change continuously and upgrading applications is relatively time-consuming.
1.2.4. Personal income tax management laws of some countries in the world and experiences with Vietnam
1.2.4.1. Personal income tax management laws of some countries in the world
Based on specific conditions and circumstances, the content of regulations on tax law in general and personal income tax management law in particular in each country has differences reflected in the following aspects:
On the management of personal income tax payers
Personal income tax of most countries in the world today determines personal income tax payers based on the following two principles:
- Principle of taxation based on residence (or abbreviated as residence principle): Some countries such as Japan, Korea, China stipulate that residents are people who have a house or have resided for one year or more, while non-residents are only present in the host country for less than one year. Countries such as Malaysia, Thailand, Singapore, Indonesia, etc. generally stipulate that residents are people who have lived in the host country for 182 or 183 days or more in the tax year or 12 consecutive months. If the above conditions are not met, they are not considered resident individuals [20, p.20].
- Principle of taxation based on source of income: Resident citizens are subject to tax on income generated in the host country and income originating from abroad, while non-resident individuals are only subject to personal income tax on income generated in the host country. Hong Kong specifically stipulates that both resident and non-resident individuals are only subject to tax on income generated in Hong Kong.
Kong, because this place attracts many foreigners to work and invest while domestic citizens rarely go abroad to do business and live [20, p.21].
On determining taxable income for personal income tax
Most countries identify taxable income and classify it according to its source: Income from labor; from production and business; income from assets such as leasing, property transfer, inheritance, gifts, presents; income from indirect investment such as interest, dividends, income shared from capital contribution activities; other income... [1, p.74]
There are two ways to determine taxable income: income received (gross income) or income received minus some expenses that generate income (net income).
- Determining taxable income on gross income: In this case, taxable income is the total amount of money that the taxpayer has received, regardless of how much or how little cost has been spent to generate taxable income. This method is simple but does not ensure fairness. Previously, our country applied this method of determination in the Income Tax Ordinance for high-income earners [20, p.21].
- Determining taxable income on net income: Most countries today (Japan, Indonesia, Malaysia, Thailand,...) determine taxable income as total income minus total deductions of that subject in the tax period, excluding tax-exempt items. Total deductions are total expenses incurred in the tax period and other deductible items according to regulations such as compulsory insurance, family deductions for taxpayers... [20, p.22]
On personal income tax exemption and reduction policy
Depending on the level of socio-economic development and political situation of each country, the tax exemption and reduction policy in each country is different. This policy is closely linked to the social security regime, demonstrating humanity, helping people reduce the tax burden. Because the tax exemption and reduction policy directly affects the revenue to the state budget of each country, in order to accurately determine the subjects eligible for exemption and reduction, countries often have to strictly regulate the accompanying conditions and fully publicize the process and procedures for requesting exemption and reduction of income tax.
The scope of tax-exempt income also varies between countries. In addition to allowing tax exemptions for basic incomes, China also allows tax exemptions for severance pay for workers or discharge allowances for soldiers, settlement allowances for state officials and civil servants, etc. In addition, some countries also have additional provisions for tax-exempt incomes of a specific nature to attract investment depending on the policy orientation of each country, for example, allowing tax exemptions for income from capital investment (South Africa, Argentina), income from long-term housing savings programs, and income of agricultural households within a certain scope is tax-exempt (Korea) [45].
About family deductions
- Deduction for individual taxpayers: This is an amount that is excluded from taxable income, regardless of the “behavior” of using the income of the individual taxpayer. The reason for applying the general deduction comes from the argument that each individual needs to have a certain level of income to meet the basic needs of life.
- Deduction for dependents: Applies to those whom the taxpayer must support; however, the scope of dependents in each country is different and is determined based on different criteria. Specifically, the deduction level prescribed for dependents in some countries is lower than the deduction level for individual taxpayers similar to Vietnam, while the UK and the US prescribe the personal deduction level for taxpayers equivalent to that of dependents. In addition, many countries control the number of dependents that can be deducted, including Thailand, Indonesia, Malaysia, but some countries do not control it, such as the US and the UK. Or, China does not prescribe separate deduction levels for dependents and for individual taxpayers, but prescribes a common level [1, p.56].
- Specific deductions: These are deductions that taxpayers are entitled to when meeting certain criteria, for example, spending on items that the state encourages such as healthcare, education, etc. When establishing specific deductions, countries control the maximum level for each type.
deductions and to enjoy these deductions, taxpayers must present relevant documents.
About personal income tax registration
Many countries in the world, including Singapore, Thailand, the US, the UK, and France, have changed their views on the position of taxpayers in the tax system to ensure revenue for the state budget and create a good mentality for taxpayers with personal income. From the concept that taxpayers in the tax management system are managed subjects to the position of customers, at the same time, shifting from the model of State management to the model of State service [20, p.55]. This strategy is really effective, motivating taxpayers to fully fulfill their tax obligations to the State, so Vietnam is gradually learning and applying this view to improve the effectiveness of personal income tax management.
About personal income tax declaration
Currently in the world there are two ways to manage personal income tax declaration as follows:
- Full declaration is applied in Australia, Canada, the US and Singapore... Accordingly, individuals whose income reaches a certain level (minimum level - called declaration threshold) must submit a tax return. This principle applies to individuals whose only income is from salary paid by the employer [32], [33].
- Limited declaration is applied in Germany, Japan, the Netherlands, the UK... Specifically, many individuals do not have to submit tax returns but are taxed from deductions at source through the salary deduction system to reduce the pressure from declaration requirements for individuals with multiple sources of income [31].
On NNT inspection and examination
In general, the Tax Administration Law of each country stipulates: the authority of the tax authority; the contents of tax inspection and examination; the responsibility of taxpayers and third parties to provide relevant books and documents for tax inspection and examination... to ensure transparency and efficiency in management.
In addition to legal regulations on tax inspection and examination, some countries use additional documents and other support tools to improve management quality:
The tax inspection handbook has been published and reprinted many times in Hanoi.
Lan, becoming an effective tool for the CQT to complete its tasks [13]. The Handbook supports and guides units under the management of the CQT to develop an annual inspection plan with the most feasible plan on methods, measures, and investigation time based on the requirements, annual tasks, and capacity of the CQT. In addition, the Handbook provides regulations on personnel organization and some prohibitions; promises and commitments must be kept, and the trust of taxpayers must not be lost.
In Australia, the law stipulates that the tax system is managed publicly and balances the educational and enforcement functions. Industries with high risks when using cash payment methods will be subject to many inspections and checks. Especially the types of business services such as hotels, clubs, construction, retail of motor vehicles, fabrics and textiles [32]. Regulations combine the work of supporting taxpayers to voluntarily declare and pay taxes, some specific areas have been focused by the tax authority to inspect according to each market segment, each group of taxpayers will have corresponding measures and key professional skills. Using a compliance program for large enterprises helps the tax authority forecast revenue, identify and handle major tax risks.
1.2.4.2. Experience with Vietnam
Although the economy has had many positive changes, the management level in our country is only at an average level compared to other countries in the region and the world. Therefore, it is necessary to continuously learn and absorb the essence of international experience in personal income tax management, on that basis, select simple, suitable, feasible and easy-to-apply contents for the majority of taxpayers. Each promulgated regulation has a certain impact on tax management, so lawmakers still need to consider carefully and thoroughly if they intend to change according to the general trend.
Our country should learn the method of managing direct taxes in a stable manner, promptly warning of fluctuations and steadily increasing state budget revenues in the context of the current gradual reduction in indirect tax revenues. At the same time, we should promote the application of risk management measures in the entire personal income tax management process to effectively monitor and control high-risk subjects.
Approaching the trend of considering taxpayers as customers, not opponents
managed objects to encourage taxpayers to voluntarily comply with regulations on performing personal income tax obligations. This mechanism operates based on self-awareness, promoting autonomy and self-responsibility of taxpayers, helping tax authorities reduce the burden in management work.
Current Vietnamese law determines the deduction level based on the income and expenditure structure of the population, on that basis, assigns appropriate deductions to each subject. The lesson from personal income tax management experience on family deductions is that to accurately determine dependents, there must be coordination and regular information exchange with the competent authority in charge of household registration and social insurance.
Vietnam should adopt a limited filing method to eliminate the requirement to file tax returns for all taxable entities. Instead of having to process a large number of tax returns, which is costly in terms of resources, limited filing allows tax authorities to focus their management resources on controlling high-risk entities such as small businesses, self-employed individuals, and entities with multiple sources of income, thereby reducing some of the compliance costs for these entities.
In the current period of deep integration, efforts to adjust and perfect legal policies according to the principles and standards of international law while still being consistent with the country's development situation are necessary to ensure that there is a sufficient legal basis for the implementation of signed international commitments. A good quality tax law system in general and personal income tax management law in particular will create an attractive attraction for investment capital and highly qualified labor from abroad.