Increasing family deductions helps stimulate consumption

Spending pressure increases, need to increase family deduction level

The Ministry of Finance is currently reviewing and comprehensively evaluating the Personal Income Tax Law, including family deductions, to report to the Government, the National Assembly Standing Committee and the National Assembly for consideration of amendments and supplements.

Regarding the current family deduction level, many opinions say that it no longer reflects the reality in the current period and needs to be adjusted to 16 - 18 million VND/month to match price fluctuations and living standards.

Adjusting the family deduction level is considered necessary to ensure that tax policy is consistent with socio-economic reality and fairer to taxpayers in the context of increasing living costs, while creating momentum for sustainable economic development.

According to Associate Professor Dr. Ngo Tri Long, the current family deduction level has been too outdated compared to the growth rate of the economy and the living standards of the people. He emphasized: "While waiting for the law to be amended, it is urgent to adjust and increase the family deduction level immediately to reduce difficulties for workers. Prolonging this situation will make people's lives more difficult, especially in the context of escalating prices of goods and living costs."

Assessing the impact of increasing the family deduction level on budget revenue, experts said that if only considering personal income tax, revenue from this tax may decrease in the short term. But overall, people's disposable income will increase, which can stimulate consumption and production, thereby contributing to increasing budget revenue from other tax sources such as Value Added Tax, Special Consumption Tax and Corporate Tax.

Sharing the same view, Dr. Dinh The Hien - economic expert commented: "When the family deduction level increases, people's disposable income also increases, leading to an increase in consumption, thereby promoting revenue from Value Added Tax (VAT), Special Consumption Tax and other revenue sources from production and business activities".

Stimulate consumption, create economic development momentum

Dr. Dinh The Hien analyzed that reducing personal income tax can help stimulate consumption, create conditions for businesses to expand production and recruit workers, thereby helping to increase budget revenue from many other types of taxes. When consumption increases, retail sales and business revenue will also increase, indirectly creating additional revenue from corporate taxes. At the same time, the economy can operate more efficiently, making up for the shortfall due to reducing personal income tax.

Ms. Nguyen Thanh Mai (Hoang Mai district, Hanoi), an office worker, shared: "My salary is about 16 million VND/month but living expenses take up almost all of it. If I keep the current family deduction level, I still have to pay taxes, while in reality I don't have much money. If I raise it to about 18 million VND/month, it would be more reasonable. Then, I can have some extra money to buy necessary household items or invest in studying and improving my professional skills."

Thus, when the family deduction level increases, workers have more money to spend, thereby promoting consumer demand, helping businesses sell better, expand production, and create more jobs. This is an economic cycle that benefits the state, businesses, and people.

To avoid the situation where the family deduction level is out of date compared to reality, the expert suggested: "We need a periodic adjustment mechanism, such as reviewing and adjusting every 3-5 years according to economic fluctuations. The revision is often delayed, leading to workers being disadvantaged. If there is an automatic adjustment mechanism based on the increase in inflation or average income, the tax policy will become more reasonable and fair."