Family deduction: The 'first' problem
Recently, in addition to the joy of increasing the basic salary, many people shared their concerns about the salary increase but the family deduction level is still low, making the actual amount received not as expected. Family deduction is considered a difficult "first - where is the money" problem for many households.
A teacher confided that he and his wife are both civil servants, so all family expenses depend on their monthly salaries. After the salary increase, their income has increased, but at the same time, their living expenses have increased significantly compared to a few years ago; along with that, personal income tax has also increased because the family deduction level has remained the same. Therefore, although the salary has increased, the standard of living has not increased, and the struggle is still a struggle! In the coming time, it is likely that living expenses will become more difficult because prices continue to rise, and children are growing up, leading to higher demands for study and living.
On Facebook, it is not difficult to read the real-life sharing of women who take care of and take care of the housework: Currently, the main income of the family's main worker is about 14 million VND per month, after deducting the family circumstances of raising 1 child, they still have to pay personal income tax. The family deduction for 1 dependent is 4.4 million VND, but each month the couple has to spend 5 million VND to hire a babysitter, not to mention other expenses to serve the child's essential needs. Many families are in the same situation and it is clear that the current family deduction is not close to reality.
The increase in the basic salary from 1.8 million VND/month to 2.34 million VND/month according to Decree 73/2024/ND-CP, effective from July 1, 2024, brings with it the hope of contributing to improving the lives of cadres, civil servants, public employees and armed forces. When the salary increases by 30%, the standard of living increases, so the corresponding increase in family deductions can be considered a reasonable solution.
According to the provisions of the Law on Personal Income Tax, if the consumer price index fluctuates by more than 20% compared to the time the law comes into 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 of the family deduction level.
Since 2009, the initial family deduction when applying the law to taxpayers was 4 million VND/month. After 2 adjustments, by 2020, the family deduction for taxpayers was increased to 11 million VND/month.
There are some opinions that, from 2020 to now, the consumer price index has not fluctuated to 20%, the development of this index will continue to be monitored, from which there will be proposals to adjust the family deduction level at the appropriate time. However, there is a basis to affirm that the current family deduction level is outdated compared to the actual situation, and needs to be considered for adjustment after increasing the basic salary.
The consumer price index is an important criterion when considering adjusting the family deduction level, but it is necessary to consider other factors to ensure that it is close to the real life situation, such as average per capita income, annual inflation rate, income distribution in the population structure, etc. Not to mention that the consumer price index does not fully reflect the fluctuations and difficulties of economic life. In the past 4 years, up to 2 years the whole society has been heavily affected by the Covid-19 pandemic, up to now, the lives of the majority of taxpayers, especially workers, are still facing many difficulties.
The ratio of family deductions to average per capita wages in Vietnam is currently relatively high compared to the regional average. The family deduction for each taxpayer in China is 3,500 yuan/month, equivalent to about 0.83 times GDP per capita. Compared to some Southeast Asian countries such as Malaysia and Indonesia, Vietnam has a higher family deduction (about 1.7 times GDP per capita). In Indonesia, the deduction for individuals is about 0.527 times GDP per capita; Malaysia applies a deduction equal to about 0.312 times GDP per capita. However, due to the low average income per capita in Vietnam, the family deduction in absolute terms is still low.
The deduction policy in some countries shows that the reduction of income tax for taxpayers with serious illnesses has been applied to health examination expenses. In addition, other deductions are also specified in detail, including: Children's education, housing rental costs, elderly care, and large medical expenses. These are examples to show that the basis for adjusting the family deduction level in our country is not complete, based on income and expenses, without considering fluctuations that can strongly affect the ability to pay taxes, such as high medical expenses. The criteria for determining dependents eligible for family deductions are currently not specific. The cases of stepchildren of the wife or husband, children who go to school late, children who fail a grade, children waiting to take university entrance exams are not clearly defined, causing difficulties in law enforcement.
The family deduction needs to be calculated more carefully so that workers are not disadvantaged. Personal income tax mainly affects employees and wage earners, so the absolute number of such modest family deductions also makes it more difficult to attract foreign experts and highly skilled workers to work.
Encouraging employees to work also faces many challenges when some people think that the harder they work to earn higher incomes, the more taxes they have to pay, so they only stop at a certain threshold! Currently, many units are applying a salary payment based on productivity, but when employees see that striving for higher incomes means paying higher taxes, they will not work to their full potential, thereby reducing their enthusiasm for work.
According to the roadmap reported by the Ministry of Finance to the Government and the National Assembly Standing Committee, it is expected that in 2025, the Law on Personal Income Tax will be revised in its entirety, including the following contents: Taxable income, taxable income, family deductions. However, considering many factors, raising the family deduction level when calculating personal income tax at this time is reasonable to ensure harmony with living conditions and actual consumption, contributing to motivating, supporting, and removing difficulties for taxpayers, making the recent salary increase achieve the desired effect, which is to improve people's living standards.
