PERSONAL INCOME TAX POLICY TOWARD SUSTAINABILITY AND FAIRNESS

Abstract

Tax-benefit microsimulation models can be utilized to address a range of policy questions. In Vietnam, the personal income tax system has seven tax brackets, but its current progressive taxation has been deemed unreasonable due to its numerous steps with narrow intervals, resulting in abrupt tax step jumps. To improve the competitiveness of the economy in attracting foreign experts and skilled workers and incentivize labor efforts, we have proposed three scenarios for personal income tax brackets in Vietnam. The results indicate that a change in tax brackets, which involves increasing tax revenue and reducing inequality, is the more favorable option. However, changing the base tax deduction and additional tax deduction per dependent did not lead to desirable outcomes. These findings emphasize the importance of designing tax policies that achieve multiple objectives and are tailored to the specific circumstances of the situation.