Family deduction: The 'first' problem
Recently, in addition to the joy of receiving a basic salary increase, many people shared concerns about the salary increase but the family deduction level is still low, causing the actual amount received to not be 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 receiving a 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 remains the same. Therefore, although their salary has increased, their living standards have not increased, and they are still struggling! In the coming time, it is likely that living expenses will become even more difficult as prices continue to rise, and their children grow up, leading to higher demands for study and living expenses.
On Facebook, it is not difficult to read the real-life sharing of women who take care of and take care of the house: Currently, the main income of the family 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 realistic.
The increase in the basic salary from VND 1.8 million/month to VND 2.34 million/month according to Decree 73/2024/ND-CP, effective from July 1, 2024, is expected to contribute to improving the lives of cadres, civil servants, public employees and armed forces. When the salary increases by 30%, the standard of living increases, and 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 the basic salary increase.
The consumer price index is an important criterion when considering adjusting the family deduction level, but other factors need to be considered to ensure that it is close to the actual situation of life, 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 many taxpayers, especially workers, are still facing many difficulties.
The ratio of family deductions to per capita income 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 of about 0.312 times GDP per capita. However, due to the low per capita income in Vietnam, the family deduction is still low in absolute terms.
The deduction policy in some countries shows that the reduction of income tax for taxpayers with serious illnesses has been applied to the cost of health examination. In addition, other deductions are also specified in detail, including: Children's education, housing 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 more income, 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 income 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 effective as expected, which is to improve people's living standards.
