The fact that voters have passed successive National Assembly delegations proposing to change the way personal income tax (PIT) is calculated, towards increasing the family deduction (GTGC), shows that public opinion is very interested in reforming this tax.
There are even harsh and indignant views on the slow change in matters closely related to the lives and incomes of workers, especially in big cities.
In recent years, during National Assembly sessions, we have also seen many opinions suggesting that the National Assembly and the Government should soon fundamentally change the application of the personal income tax rate.
The deduction is too low compared to actual expenses.
Public opinion also expressed equally heated views on this issue on mass media. It is impossible to maintain the GTGC level of 11 million VND/month forever with taxpayer and 4.4 million VND/month for dependents, too low compared to the spending needs of taxpayers.
However, in response to the petitions of voters and public opinion, the Ministry of Finance still believes that there is no basis to adjust the GTGC level, because the total increase of the CPI index has not reached 20% since the most recent adjustment (2020)! So the key here is determining the GTGC level and when to adjust the GTGC level.
At the time the Personal Income Tax Law took effect in 2009 (replacing the 2001 ordinance on income tax for high-income earners), when the average GDP per capita was 1,200 USD (according to data from the General Statistics Office), the applicable personal income tax rate was 4 million VND/month for taxpayers and 1.6 million VND/month for dependents.
By 2024, GDP per capita is estimated at about 4,500 USD, an increase of 3.75 times compared to 2009, while the current GTGC level has only increased 2.75 times.
That shows a huge difference between the increase in GDP per capita compared to the increase in GNP, and the prices of many goods have increased very high, especially real estate and housing (the biggest and most important needs of workers).
Furthermore, the current basic salary is 2,340,000 VND/month, 4.3 times higher than the basic salary in 2009, much higher than the increase in GTGC (2.75 times) during the same period.
Basic salary increase policy and increase minimum wage The regional indexes are the most clearly reflecting the increasing demand of workers, ensuring compliance with the increasing fluctuations in commodity prices and consumption, and we can also easily adjust them.
So why hasn't the VAT rate been adjusted up? With today's lifestyle, especially in big cities, even a person who earns money on 11 million VND is hardly enough to cover their expenses.
The 4.4 million VND level for dependents is even more difficult. Why are dependents only allowed to spend 4.4 million VND?
Even though they do not earn money, dependents still have the same need to ensure their lives and living as taxpayers, especially children and the elderly. Their needs for education and medical treatment are also very expensive. Do we think that they are just "dependents" and do not need to spend much?
Relying solely on CPI for adjustment is not appropriate.
I think that it is not appropriate to only base the adjustment of the GTGC level on the CPI index, while the GDP growth index is very important but is not taken into account.
The reality of workers' lives varies greatly not only according to the CPI, but also due to the development of the economy and workers' income.
As income increases, spending needs will also increase. This spending also serves to regenerate labor and the needs of the taxpayer and his family.
While the CPI index is calculated according to macro criteria, in reality, the prices of many goods fluctuate daily and hourly, with increases much larger than the average CPI index, and many goods even increase "dizzily" such as housing, real estate, entertainment, etc.
The goal of the personal income tax policy is to redistribute and regulate social income. However, this is a direct tax, so workers can immediately see the amount of tax they have to pay, while they cannot immediately see any compensation from the tax source that the State collects from other high-income earners.
Therefore, in my opinion, it is necessary to soon adjust the provisions of the Personal Income Tax Law in the direction of empowering which agency is allowed to decide to adjust the personal income tax rate according to the actual situation.
Adjusting the VAT rate and tax threshold should be based on the GDP growth rate, basic salary or regional minimum wage, these indicators most closely reflect the spending needs and living standards of workers, not based on the CPI index.
In addition, it is necessary to increase the VAT rate for dependents to be closer to that of taxpayers.
In particular, it is necessary to divide the GTGC levels by region to be closer to the socio-economic situation of each locality, instead of applying a common GTGC level for the whole country. This leveling is very inappropriate, causing more difficulties for workers.
In fact, the correlation between income and consumption needs and life in urban areas is different from rural areas, especially in large cities such as Hanoi and Ho Chi Minh City.
Furthermore, we set regional minimum wages for different regions, then different allowances by region... but equalizing the GTGC level is very unreasonable.
Finally, it is necessary to adjust the progressive tax schedule in a way that reduces tax rates for low and middle income levels and increases them for high income levels to clearly promote the role of income coordination but also protect the consumption needs and basic satisfaction of low and middle income workers.
We are not too worried about the difficulty in collecting budget. Because if we adjust properly, not only will revenue not decrease but it will increase.
Furthermore, if taxpayers have more money, they will certainly spend more, contributing to stimulating consumption and increasing production of goods and services.
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