Household deduction level in the personal income tax system
Vietnam's personal income tax policy system has undergone many adjustment stages to ensure fairness in income regulation. The decree on Income Tax for high-income people was passed in 1990, marking the first step in applying this tax in Vietnam. In 2007, the National Assembly officially issued the Law on personal income tax, effective since 2009, expanding the scope of regulation, eliminating discrimination between domestic and foreign individuals, and applying a family deduction mechanism for taxpayers and dependents.
The implementation of the Law on personal income Tax has contributed significantly to encouraging financial resources for the State budget (NSNN), while supporting income regulation, strengthening control and resource distribution in the economy. Currently, personal income tax is one of the four most important taxes, with revenue increasing in both absolute value and proportion to total state budget revenue.
During the application process, the family deduction has been adjusted many times to suit the reality, from 4 million VND/month in 2009 to 9 million VND in 2013, and is currently 11 million VND/month from 2020. At this level, individuals with an income of VND17 million/month (one dependent) or VND22 million/month (two dependents) after deducting insurance do not have to pay personal income tax.
Expenditure pressure is getting higher
However, in the context of continuously increasing living expenses, many opinions say that the current family deduction level has not kept up with reality. Mr. Doan Quoc Viet, a technology employee in Ho Chi Minh City, said that his and his wife's income ranges from 25-30 million VND/month, but the expenses make the family's finances limited.
"Rental costs, children's tuition, food, electricity, water, gasoline... have all increased in recent years. The rent for a small apartment in Ho Chi Minh City alone has increased to 7-9 million VND/month. Meanwhile, the family deduction remains the same, causing the taxable income to remain unchanged despite increased spending pressure," Mr. Viet shared.
Ms. Nguyen Thi Hong Nhan, a specialist at an insurance company in Ho Chi Minh City, also said that the family deduction level is no longer suitable. "The cost of preschool education for my child has reached 4 million VND/month, 2 million VND for extra language learning, and about 1 million VND for milk and medicine. The cost for children alone is 8 million VND/month, but the family deduction for dependents is still 4.4 million VND/month. If there are reasonable adjustments, workers will be less pressured" - Ms. Nhan said.
Need to adjust to suit reality
According to experts, the family deduction level needs to be flexibly adjusted according to changes in the socio-economy to ensure that tax policies are consistent with the actual living standards of the people.
Dr. Nguyen Duy Phuong - Investment Director of DG Capital - said that maintaining a fixed family deduction level for many years can cause a part of workers to be subject to more taxes even if their actual income does not increase. "When the average spending per capita increases, but the taxable threshold remains unchanged, this can reduce people's actual income. Adjusting the family deduction level not only helps ensure fairness but also contributes to maintaining purchasing power in the economy" - Dr. Phuong commented.
In fact, in many countries, personal income tax policies are often adjusted periodically to suit price fluctuations and people's income. For example, some countries refer to family deductions with the consumer price index (CPI) or the minimum wage to ensure the reasonableness of income regulation.
Dr. Nguyen Ngoc Tu - Lecturer at Hanoi University of Business and Technology - also said that the current calculation method based on general CPI may not accurately reflect the standard of living of workers. The CPI includes more than 700 items, while workers mainly spend on some essential items such as food, housing, and education. If the family deduction level is only adjusted when the CPI increases by more than 20%, it may not really be suitable for actual spending" - Dr. Tu commented.
He proposed that there should be an automatic mechanism to adjust the family deduction level according to fluctuations in living prices, instead of waiting until the CPI increases sharply to consider changes.
According to experts, the current family deduction may not keep up with actual spending, especially in the context of rapidly increasing living expenses in recent years. Some proposals suggest that the family deduction should be increased to 18-20 million VND/month for taxpayers, and 7-9 million VND/month for dependents, to ensure compliance with the current socio-economic situation.
Considering adjusting the family deduction level not only helps reduce financial pressure on people, but also contributes to ensuring a fairer and more reasonable tax policy in the context of a volatile economy.
In order to contribute to perfecting the personal income tax (PIT) policy in a way that is suitable for the socio-economic context, Lao Dong Newspaper in coordination with the National Economics University organized a workshop with the theme "Personal Income Tax Law - Ensuring fairness, promoting growth". The workshop took place at 2:00 p.m. on March 14, 2025 at the headquarters of Lao Dong Newspaper (No. 6 Pham Van Bach, Cau Giay, Hanoi), with the participation of experts in the fields of tax, finance, economy, representatives of management agencies, enterprises and financial - banking organizations.
The workshop was organized in a combination of direct and online on the communication channels of Lao Dong Newspaper, creating conditions for a large number of experts, managers, businesses and interested people to follow and contribute their opinions.
