Question: Why does the government impose taxes although they lead to
deadweight losses?
Answer:
According to Vietnamese law, taxes that Vietnamese enterprises must pay include:
• Personal Income Tax
• Value Added Tax
• Registration Tax
• Special Consumption Tax
• Import and Export Tax
• Natural Resource Tax
• Corporate Income Tax
1. Personal Income Tax:
– Personal income tax (PIT) is an amount that income earners must take from a
portion of their wage or from other sources of revenue and pay into the state
budget after deductions. Because low-income persons are exempt from paying
personal income tax, this cash will be distributed fairly to all recipients, helping to
reduce societal disparities.
– Residents and non-residents in Vietnam with taxable income are the two types of
people who must pay personal income tax. Specifically:
+ For residents, taxable income is the amount earned both inside and outside
Vietnam’s borders (regardless of where the income is paid).
+ In the case of non-residents, taxable income is money earned in Vietnam
(regardless of where the income is paid and received)
• The role of personal income tax
– For the social economy:
+ Increase revenue for the state budget
+ Contributing to social justice
+ Detect illegal income
– For the tax system:
+ Overcoming limitations of other taxes
+ Limit loss of corporate income tax
2. Value Added Tax
– VAT, or value-added tax, is a tax that is determined based on the value of goods
and services at various stages of production, circulation, and consumption. VAT
does not apply to the whole cost of a service or product; rather, it only applies to
the added value of that service or product.
– Goods and services used for production, business, and consumption in Vietnam
are subject to value-added tax, with the exception of those not subject to tax under
the Law on Value-Added Tax and guiding legal documents.
– The role of VAT:
+ Create a stable source of income for the State budget.
+ Organization and management of tax collection will be easier than direct taxes
