Proposals for PIT on properties with unclear origin

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The Government Inspector General Le Minh Khai

The tax rate is proposed at 45%

On behalf of the Government, the Government Inspector General Mr. Le Minh Khai said that at the 4th session, many delegates suggested to supplement regulations detailing the withdrawal, sanction for above properties through civil or judicial procedures in a public and strict manner.

According to the Government, the handling of properties or incomes of dishonest declarations or additional properties or incomes which the declarants cannot explain clearly about their origin is related to the ownership of the property of declarants, spouses and their minors’ children. Besides, the handling through criminal proceedings, civil proceedings is a new and complicated method that can affect the constitutional rights of citizens.

At the same time, the method requires many conditions that are now not in accordance with the current Vietnamese law and management, such as the condition on a system for effective management of properties, incomes and expenditures in society or change in basic principles in criminal procedure code and civil proceedings concerning proving obligation.

The Government said that two options were given to the discussion. The first was that the mechanism for the recovery of such properties was made through the determination of the act of tax evasion and provisions for the transfer of the case file from the agency and unit in charge of managing the properties and incomes to the tax management agency must be issued. The second was that appropriate sanctions must be issued because the cases of such properties and incomes were considered as administrative violations.

Regarding the first option, the Government submits two options for levying tax on properties with unclear origin. One is the agency or unit managing the properties and incomes requests the tax agency to collect personal income tax at the rate of 45% on incomes in which declarants have untruthfully declared and on additional properties which the declarants did not declare them without a reasonable explanation. The Government agreed with this option.

Regarding the second option, the agency and unit managing properties and incomes requests the competent agency to issue a decision on sanctioning administrative violations with a fine equal to 45% of the value of additional properties and incomes of unclear origin.

Be careful and a roadmap is required

Le Thi Nga, Chairman of the Judicial Affairs Committee, said that the social characteristics of our country make the determination of the reasonableness of the origin of properties in general very complicated.

Legally, according to the provisions of the Criminal Procedure Code, the obligation of proving the crime belongs to the State, therefore, it cannot automatically assume that the properties of which origin cannot be explained reasonably are properties from corruption to be confiscated by criminal method.

On the other hand, under the provisions of the Civil Code on the grounds for establishing ownership and the provisions of Civil Procedure Code on the proving obligation, such properties are also not considered as State properties to establish the State ownership. And it was also difficult to fulfill the proving obligation of representative of the State on lawsuit.

"This is the first time that we have addressed the issue on the handling of properties of which origin cannot be explained reasonably and this issue is big and related to property ownership which is a common right of a citizen described by the constitutions. The handling methods need to be considered carefully and appropriately to meet the requirement of anti-corruption and ensure the common rights of citizens”, Ms. Nga stressed.

In terms of specific options, the Judicial Affairs Committee also gave 2 different comments. One side agreed with the first option of the draft law and said that properties and incomes which the declarants cannot explain their origin reasonably, but the State also fails to prove that such properties and incomes have illegitimate origin, in the immediate future, they can be considered as arising incomes which the declarant has not paid tax and shall be forced to pay tax, which is an appropriate method in the current conditions.

The other side agreed with the second option of the draft law because the relationship between the State and officials, civil servants and employees in control and declaration of properties and incomes is the administrative relationship. The Officials, civil servants and employees are obliged to strictly comply with the anti-corruption Law, including the obligation of honesty and transparency in the declaration of properties and incomes.

Thus, for actual properties and incomes that are more than the declared properties or incomes, or the additional incomes for which the declarants cannot reasonably explain the origin, then the State will impose administrative sanctions on acts of dishonesty and unclear declaration of assets and incomes.

Those that agreed with second option 2 also recommended that the unit or agency controlling the properties and incomes shall ask the Court to decide the handling of properties and incomes that the declarants fail to explain their origin.

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Some suggested that it should maintain the current provisions on handling the violations on property and income transparency. This means that it is not necessary to add provisions on handling of properties and incomes which the declarants do not explain reasonably about their origin. If the competent state agencies prove those properties gained are due to corruption or criminal acts, they shall be confiscated to State fund or handled according to the provisions of relevant laws. The declarants who declared those properties and incomes untruthfully and fail to explain their origin shall be disciplined according to the violation levels.