'The 11 million family deduction is outdated'

The Ministry of Finance has just proposed to increase the family deduction for personal income tax payers from 9 million to 11 million VND and the amount for dependents from 3.6 million to 4.4 million VND. This level was calculated by the Ministry of Finance based on data provided by the General Statistics Office, the CPI at the end of December 2019 compared to July 1, 2013 increased by 23.2%.

Faced with this information, even Ms. Hoa, a taxpayer - an employee of an import-export company in District 10 (HCMC), was extremely surprised. As the "keeper of the keys" in the house and in charge of daily shopping, she knows better than anyone else about price fluctuations.

She said, c2-3 years ago,200,000 VND is enough for a whole day's worth of groceries for 5 people, but now "even if you're very frugal, it's over 300,000 VND". Not only that, electricity and water bills have also increased. "Even the garbage collection fee, which used to be around 15,000-20,000 VND a month, has now jumped to 40,000-50,000 VND", she said.

Similarly, Mr. Nam - an employee of a bank also expressed his disappointment when he said that the Ministry of Finance's statistics on the CPI index at the end of December 2019 compared to July 1, 2013 increased by 23.2%, but the actual increase in the market was many times larger. He gave an example, a breakfast sandwich, in 2013 cost only 7,000-8,000 VND but now has increased to 15,000-20,000 VND, an increase of more than 2 times.

Many experts also believe that this new proposed level is too low and unreasonable.Associate Professor, PhDNguyen Khac Quoc Bao - Head of the Finance Department of Ho Chi Minh City University of Economics analyzed that the way the Ministry of Finance did it was to take 9 million VND and multiply it by the CPI growth rate of 2019 compared to 2013, which was 23%, to get the number of 11 million VND.

"This is a cold and insensitive way of doing things," said Mr. Bao, adding that a policy that affects the livelihoods of more than 90 million people is calculated and planned more simply than a first-year student's statistical problem. "So where is the responsibility, accuracy and public interest?" asked Mr. Bao.

According to this person, from a professional perspective, when taking the value of a commodity adjusted according to CPI, it is to return to the parity state of the underlying assets in the past and present. Simply put, suppose a meal for a family of four in 2017 was worth 100,000 VND, then with the above calculation in 2019 it is 123,000 VND. That means the ingredients, quantity and quality of the meal have not changed.

With the Ministry of Finance's approach to the problem, Mr. Bao wondered if after nearly 10 years, people's quality of life was still stagnant, with no "little bit of meat and vegetables" added.

"Yet the Ministry of Finance wants people's living standards to stagnate, even regress, and after 10 years the results of economic growth have not been realized," he said, adding that the Ministry of Finance's calculation only aims at one sole purpose: maximizing tax revenue and violating the principle of revenue enhancement.

Therefore, according to Mr. Bao, if we want to calculate concisely, we must use GDP growth rate to measure the growth rate of per capita income. Because this is the "taxable income threshold", it must be adjusted by the growth rate of income, and the concept cannot be swapped with "CPI growth rate".

If the average annual economic growth is 6.5% in the period 2013-2019, for the tax law to take effect in 2020, the cumulative income growth rate is more than 55%. Therefore, the minimum taxable income threshold must be 14 million (9 million times 155%). Similarly, the exemption for dependents must be rounded to 6 million per person (3.6 million times 155%). That is, a person with an average monthly income of 20 million VND, who has to support 1 additional dependent, does not have to pay personal income tax.

But according to Mr. Bao, it is best that the taxable income threshold be adjusted annually to closely follow real life.

Some other experts also believe that the family deduction level proposed by the Ministry of Finance is not appropriate. According to lawyer Nguyen Van Hau - Chairman of the Vietnam Lawyers Commercial Arbitration Center (VLCAC), the regulation that CPI increases beyond 20% has just proposed adjusting the family deduction level, but the calculation method of this new level has not been applied in the future.

Furthermore, according to him, the entire economy, from businesses to people, has been severely affected by Covid-19, and it is impossible to base this income level on calculating taxes for this year and the coming years. "DThe proposal for this new family deduction has not yet been applied and is already outdated and inappropriate. Taxpayers will suffer."It is necessary to recalculate more appropriately to avoid the law having to be revised over and over again after it is put into use," Mr. Hau suggested.