Reduce personal income tax: Deduct tuition and hospital fees but need a threshold

Personal income taxpayers will be able to deduct medical, education and training expenses for themselves and their dependents, according to a new proposal by the Ministry of Finance in the draft Law on Personal Income Tax (replacement) that is seeking comments.

Proposal for the Government to regulate the deduction level for medical and educational expenses

In the draft Law on Personal Income Tax (replacement) that is being consulted, the Ministry of Finance proposes to add a number of specific income deductions.

Accordingly, the Ministry proposes that taxpayers are allowed to deduct from their income before calculating taxes the expenses for healthcare , education and training of the taxpayer and his/her parents, spouse and children who are dependents of the taxpayer.

The scope and level of deductions for these expenses need to be carefully considered to ensure that the goal of supporting taxpayers is achieved while maintaining the regulatory and income redistributive role of the personal income tax policy.

Therefore, the drafting agency proposed that the Government provide detailed regulations to ensure flexibility and suitability to the socio-economic situation.

The proposal of the Ministry of Finance comes from the fact that many opinions suggest that it is necessary to consider allowing taxpayers to deduct some expenses incurred during the year, such as medical and educational expenses, before calculating taxes. This is to reduce the financial burden and support people to have better access to essential services.

Proposal for taxpayers to deduct from their income before calculating taxes expenses for healthcare and education. Photo: Tung Tin

In addition, according to the Ministry of Finance, through studying the experience of other countries, most personal income tax laws have provisions on family deductions in different forms and ways. Countries apply them into 3 groups: General deductions for individual taxpayers; deductions for dependents and deductions of a specific nature.

In particular, specific deductions are deductions that taxpayers are entitled to when meeting certain criteria. Spending on items that the state encourages such as health care, education...

The scope of these deductions is also very diverse. Some countries allow deductions for social insurance and health insurance contributions to encourage people to participate. Some countries allow deductions for children's education costs, or allow deductions for mortgage interest to encourage people to own a home or charitable contributions.

The current Personal Income Tax Law provides for personal deductions and family deductions for dependents that the taxpayer must support.

At the same time, the law also stipulates that social insurance, health insurance, unemployment insurance, professional liability insurance contributions for certain industries and occupations that must participate in compulsory insurance, special subsidies and allowances, charitable and humanitarian contributions, etc., are not included in taxable personal income.

Need to regulate tax deduction ceiling

Sharing with VietNamNet reporter , Mr. Nguyen Van Duoc, Head of Policy Department of Ho Chi Minh City Tax Consultants and Agents Association, General Director of Trong Tin Accounting and Tax Consulting Company Limited, assessed that the fact that the Ministry of Finance listened to opinions and referred to international experience when including other specific expenses related to education and healthcare for taxpayers and dependents is a good thing.

This demonstrates the drafting agency's openness to new ideas and is consistent with international practices and current practical conditions. In particular, the drafting agency requested the Government to provide detailed regulations to ensure flexibility and suitability with the socio-economic situation.

However, Mr. Duoc said that the Government needs to clearly define the expenses for health care and education for taxpayers and their dependents. As for dependents such as parents and other dependents, only health care expenses should be regulated, not educational expenses should be deducted because it is not appropriate.

According to the expert, it is necessary to set a specific ceiling for deductible medical and educational expenses to ensure that these expenses do not exceed a certain percentage of the taxpayer's income. Another option is to base the cost of public hospitals and schools on calculating a reasonable deduction level.

“It is possible to allow 100% deduction of medical examination and treatment costs and tuition fees in the public system, but still limit it to an appropriate percentage of total income. This ensures that taxpayers are responsible for contributing to the budget, while maintaining fairness among target groups.

At the same time, the deduction level needs to be designed reasonably, avoiding being too high, causing budget loss and reducing the effectiveness of regulation and orientation of tax policy," Mr. Duoc suggested.

Source: https://vietnamnet.vn/chi-phi-y-te-giao-duc-duoc-tru-thue-thu-nhap-ca-nhan-can-quy-dinh-nguong-tran-2425619.html