The large gap between deductions and actual employee spending
At the regular Government press conference in July, Deputy Minister of Finance Nguyen Duc Chi said that the Ministry of Finance has received many opinions from experts and relevant agencies when developing a plan to adjust the family deduction level. This is a factor that directly affects the amount of tax payable by employees in the context of increasing living expenses.
The Ministry has proposed two options: Continue to base on the consumer price index (CPI) or calculate according to the average income growth rate and GDP per capita. Most experts are leaning towards the second option because it reflects reality closely, associated with people's affordability and living standards.
However, reality shows that the current family deduction - 11 million VND/month for employees themselves and 4.4 million VND/dependent - was issued in 2020 and is no longer suitable for current living expenses, especially in Hanoi and Ho Chi Minh City.
Mr. Nguyen Van Tung, a marketing staff in Tay Ho, Hanoi, said: "My income has just increased by 2 million VND but I have to pay taxes at a higher level. Meanwhile, rent, tuition for children, and living expenses all increased, so the remaining amount actually decreased.
Dr. Nguyen Ngoc Tu - Lecturer at Hanoi University of Business and Technology - said that the plan to increase the family deduction to 15.5 million VND/month is a positive one, more beneficial for taxpayers, but not enough compared to reality. He proposed to increase it to about 18 million VND/month, the deduction for dependents is 9 million VND/month, and apply it right from the 2025 tax calculation period instead of waiting until 2026.
According to Mr. Tu, in the past 5 years since the most recent adjustment in July 2020, salary workers have experienced many major socio-economic events such as the COVID-19 pandemic and natural disasters, but have never received appropriate support, and still have to fully fulfill their tax obligations. "Taxpayers have waited for a long time and suffered many disadvantages. Applying it in 2025 will be a timely support, while creating motivation for them to actively work, increase productivity, and contribute to promoting the socio-economy," he emphasized.
Need to automatically adjust annually instead of waiting for the law to be amended
Sharing the same view, Mr. Nguyen Quang Huy - CEO of the Faculty of Finance - Banking, Nguyen Trai University - said that the current family deduction level was outdated when issued in 2020, while the cost of healthcare, education, housing and energy, especially in urban areas, increased faster than the CPI due to high core inflation and imbalance in supply and demand. The proposal to increase to 13.315.5 million VND is a reasonable step forward but still does not fully reflect the actual spending pressure of workers, especially the urban middle class.
He proposed linking the adjustment of family deduction with CPI, automatically adjusting it annually instead of waiting for the law to be amended; studying the application of regional deduction, similar to the calculation of regional minimum wage; extending the conditions to prove dependents and allowing additional deductions for social expenses such as tuition fees, health costs other than health insurance.
From another perspective, Associate Professor, Dr. Phan Huu Nghi - Deputy Director of the Institute of Banking and Finance, National Economics University - said that the deduction should be based on the common income of salaried workers. With an average income per capita of 4,622 USD in 2024, the majority of workers are receiving 1723 million VND/month, so the family deduction should be 20 million VND or more to ensure long-term fairness and stability.
Not only reducing tax rates, but tax rates also need to be adjusted accordingly
Ms. Pham Thu Ha, an accountant in Hanoi, said: "Adjusting family deductions will only be effective when reforming tax forms progressfully, because if many levels and high tax rates are still maintained, it will be difficult for workers to reduce the pressure to pay taxes".
Experts also share the same view that progressive tax reform is necessary.
Dr. Nguyen Ngoc Tu proposed increasing the taxable income threshold, reducing the number of grades and lowering the highest tax rate from 35% to about 25% to approach corporate income tax, thereby creating a fair competitive environment for human resources.
Mr. Nguyen Quang Huy supports the withdrawal plan from 7 to 5 levels, but believes that the 35% tax rate should only be applied to income over 100 million VND/month instead of 80 million VND.
Associate Professor, Dr. Phan Huu Nghi emphasized that the highest tax rate should only stop at 25%, and at the same time design a tax table with a clear distance between levels to avoid causing "tax shock" for the high-level labor group, while maintaining attraction for high-quality human resources.
