(kontumtv.vn) – According to economic experts, the current family deduction in personal income tax is no longer suitable for people's actual living standards.

Photo caption
Officials of the Yen Bai City Tax Department guide people through tax payment procedures. Photo: Pham Hau/VNA

Although the deduction has increased, inflation and rising living costs are causing difficulties for many families. Therefore, timely adjustments are needed to reduce the tax burden on workers, especially when the average income of people is still low compared to the current deduction.

Personal income tax includes taxes from salaried employees (mainly) and business individuals. This is one of the three main taxes of the budget, along with corporate income tax and value added tax (VAT).

Since 2009, when the Personal Income Tax Law took effect, the initial family deduction when applying the law to taxpayers was 4 million VND/month, by 2020 it was increased to 11 million VND/month (132 million VND/year) and 4.4 million VND/dependent. With the current deduction, people with income from salaries and wages at 17 million VND/month (if there is 1 dependent) or 22 million VND/month (if there are 2 dependents) after deducting social insurance, health insurance, unemployment insurance, etc., currently do not have to pay personal income tax.

Ms. Nguyen Thi Thu (Hanoi) and her husband are both salaried employees, have 2 children of school age under 18 years old, and have a total monthly income of more than 37 million VND. The two children are being declared for family deductions according to their father because Ms. Ha's husband has an income of more than 20 million VND. So currently, only Ms. Thu's income is subject to personal income tax.

According to Ms. Thu, with the current personal income tax rate and family deductions, her family is losing about 5 million VND in taxes each year. Although this is not a large amount of money, it is still very valuable for her family's circumstances.

“The tuition fees for our two children, along with the constantly increasing cost of living due to inflationary pressures, have created a huge financial burden for my husband and I, even though our income is not too low,” Ms. Thu shared.

Not only Ms. Thu, many families living in big cities like Hanoi and Ho Chi Minh City are also under similar pressure. Daily expenses such as: education, food, fees... make the income almost no longer have room. That is not to mention the unexpected expenses such as: illness; funeral, wedding, funeral, etc. This makes the need for savings of families almost "zero". For young families, saving income to buy large assets such as houses is almost impossible.

According to the 2023 Population Living Standards Survey Report published by the General Statistics Office (Ministry of Planning and Investment), Vietnam's average monthly income per capita (at current prices) is 4.96 million VND and the group of households with the highest income (the group of the richest 20% of the population - group 5) has an average income of 10.86 million VND/month/person. Accordingly, the current deduction for taxpayers (11 million VND/month) is more than 2.21 times higher than the average income per capita, equivalent to the average income of the richest 20% of the population.

The Personal Income Tax Law stipulates that when the CPI fluctuates by more than 20% compared to the time the law takes effect or the time of the most recent adjustment of the family deduction level, the Government shall submit to the National Assembly Standing Committee an adjustment in accordance with price fluctuations to apply to the next tax period, but through monitoring from 2020 to present, the CPI has not fluctuated to 20%.

Economic experts say that the current personal income tax rate is no longer suitable for reality and needs to be adjusted appropriately to ensure people's lives.

According to economic expert Dinh Trong Thinh, Associate Professor, Dr. Dinh Trong Thinh, the deduction level when calculating taxes must be based on people's actual lives, real expenses such as illness, disease, and raising children's education need to be included.

Expert Dinh Trong Thinh said that with the regulation of adding 20% ​​of CPI to adjust family deduction, this policy is outdated, not keeping up with the pace of change of the economy and living costs. Since 2020, prices have been increasing continuously, but the deduction level remains fixed, which is unreasonable. Therefore, according to Dinh Trong Thinh, the family deduction level is too low and needs to be increased. In big cities like Hanoi and Ho Chi Minh City, the deduction level should be around 16-18 million VND/month or more.

Previously, in the Government's submission to the draft Law on Personal Income Tax (replacement) in November 2024, the Ministry of Finance assessed that the current family deduction level has been applied since 2020 and needs to be re-evaluated to propose amendments and supplements in accordance with new conditions.

According to the Ministry of Finance, the specific family deduction level needs to be carefully calculated, in accordance with price fluctuations, the increase in people's living standards as well as forecasts for the coming time.

The Ministry of Finance proposes to study and adjust the progressive tax schedule for income from salaries and wages of resident individuals. Vietnam can study to reduce the number of tax brackets of the current tax schedule from 7 to an appropriate level; consider widening the income gap in tax brackets...

Mr. Truong Ba Tuan, Deputy Director of the Tax Administration Department (Ministry of Finance), said: CPI may fluctuate strongly in 2025, and the Ministry of Finance will propose adjusting the family deduction level without amending the Personal Income Tax Law. It is expected that the October meeting will consider this issue, and the Ministry of Finance is reviewing and planning to amend the Law in 2025.

In 2024, the Ministry of Finance said that the estimated annual personal income tax revenue is 189,000 billion VND, an increase of 20% over the same period last year (157,000 billion VND).

Thuy Duong (Vietnam News Agency)