Mr. Ho Duc Phoc: Will increase the family deduction for personal tax calculation when amending the law

Finance Minister Ho Duc Phoc admitted that the current family deduction for personal income tax is low compared to life in urban areas and will increase this level when the law is revised.

The above information was shared by Minister of Finance Ho Duc Phoc in the hallway of the National Assembly on the afternoon of November 2.

Currently, the family deduction is 15.4 million (including personal deduction of 11 million and dependent deduction of 4.4 million) maintained since July 2020. Meanwhile, most consumer goods and services have increased by about 20-30% since the Covid-19 pandemic, causing people's living expenses to increase.

This family deduction, as explained by the tax authority, is determined by "the level of spending to meet the minimum living needs of a person" - 11 million VND for the taxpayer and 4.4 million for a dependent. This 4.4 million figure is determined by 40% compared to the taxpayer's own deduction.

"The family deduction used to calculate personal income tax is low," Finance Minister Ho Duc Phoc acknowledged.

Mr. Ho Duc Phoc, Minister of Finance. Photo: Hoang Phong — Mr. Ho Duc Phoc, Minister of Finance. Photo: *Hoang Phong*

The Minister further analyzed that the family deduction for personal income tax is currently 11 million VND for the taxpayer, and 4.4 million VND for dependents, while the average salary is currently 4.6 million VND per month. That means the family deduction for taxpayers is higher than the average salary, but compared to life in urban areas, this level is low.

He also informed that the current family deduction for taxpayers is more than 2.4 times the average income per capita, much higher than the common rate applied by countries around the world of 0.5-1 times.

The Ministry of Finance has proposed that competent authorities consider including the Law on Personal Income Tax in the amendment program to adjust the regulations on income tax calculation.

Regarding the proposed law amendment, Mr. Phuc said that salary reform will be implemented from July 1, 2024. Along with this change, the financial sector will calculate the original income, the average annual salary increase (7-8% per year) as the basis for calculating average income. This will be the basis for classifying subjects according to income levels, regions and the basis for increasing family deductions for tax calculation to suit reality.

However, this revised bill has not been added to the upcoming law-making program, so in the immediate future, the Ministry of Finance will amend laws such as Value Added Tax, Corporate Income Tax, Special Consumption Tax and the revised tax code to support people.

Previously, in a discussion at the National Assembly on the morning of November 2, Mr. Tran Van Lam, Standing Member of the Finance and Budget Committee, "criticized" the outdated way of calculating personal income tax.

Mr. Lam commented that the regulations in calculating personal income tax such as starting point of taxable income, family deduction level, taxable level... are outdated, as they are not updated according to fluctuations in minimum wage, prices and inflation. Mr. Lam said this is a major problem that needs to be changed.

A survey by VnExpress earlier this year also showed that, with more than 23,900 readers with an average income of VND22 million per month, taxpayers spend more than VND10 million per month on themselves, but they spend at least VND7 million to support a dependent - accounting for 70% of their personal spending, much larger than the 40% rate determined by the Ministry of Finance.

Mr. Minh

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