While proposing the removal of personal income tax from the earnings of casino and lottery winners, the Vietnamese government has also suggested a 5 per cent increase in special consumption tax for casinos.
The government told the National Assembly last week that the personal income tax (PIT) on earnings derived from casinos should be removed. Under the existing Law on Personal Tax Income, a 10 per cent tax shall be imposed on winners of more than VND10 million ($47.6) in casinos and lotteries.
“Still, it is impossible to determine people’s winnings. Thus, it is also difficult to tax such earnings,” said Minister of Finance Dinh Tien Dung.
Some countries and territories like the Philippines, Singapore, Laos, Malaysia and Macau do not impose any PIT on casino and lottery winners, but they have tax mechanisms to collect PIT. For example, in Singapore, foreigners are required to show their passports if they want to enter a casino. However, Singaporean citizens have to pay 100 Singaporean dollars ($80) before they are allowed to enter a casino.
“So the government has asked the National Assembly to eliminate the PIT for these winners,” Dung said.
The removal of PIT will mean the state coffers will annually suffer from a shortfall of about VND200 billion ($9.52 million). However, this sum will be offset by an increase in special consumption tax (SCT).
The government has also proposed increasing the SCT for casinos from the current 30 per cent to 35 per cent under the draft amendments to the existing Law on Special Consumption Tax. If this increase is approved by the National Assembly, it will estimatedly add VND517 billion ($24.62 million) to the state budget annually.
Casinos in Vietnam are currently subject to a 30 per cent SCT rate, corporate income tax of 22 per cent (20 per cent from 2016), and value added tax of 10 per cent.
“The rise in SCT for casinos and the removal of CIT for casino winners will help simplify tax policies for casinos in line with international practices,” said a government report on the impacts of the draft amendments. “Under [the Ministry of Finance’s] calculations, the contributions made to the state budget by businesses will not change after the rise in SCT and removal of CIT.”
Daniel A. Witt, president of Washington, DC-based International Tax and Investment Centre, told VIR that the government should carefully study responses from the public and enterprises before revising any tax rates.
“Any tax rise should be subject to a roadmap. Vietnam should shun creating tax shocks. It should use a gradual multi-year approach across all products when increasing SCT,” he said.
There are now seven licensed casino projects in Vietnam, with six currently in operation. Five small-scale casinos are operating in Haiphong and Danang cities and the provinces of Lao Cai and Quang Ninh, while a large-scale casino is operational in the southern province of Ba Ria-Vung Tau.
VIR/VNN