The personal allowance cannot be a uniform figure as it is currently; it needs to vary by region, depending on the economic conditions of that locality or region. But what basis should be used to calculate an appropriate figure?
The Ministry of Finance proposes reducing tax brackets to lessen the burden on individual income taxpayers - Photo: NGOC PHUONG
The comprehensive revision of the Personal Income Tax Law, currently being drafted by the Ministry of Finance, is very necessary, although it should have been done sooner.
The issues currently attracting attention from experts and the public include the appropriate amount of personal allowance deductions and how to calculate them, as well as the income brackets subject to tax and the personal income tax rates.
It is impossible to standardize the personal allowance deduction.
I completely agree that the Personal Income Tax Law needs to be drastically and comprehensively reformed. In particular, I agree that the law's development should adapt to changing circumstances, ensuring it remains relevant to people's incomes and living standards, while also providing a mechanism for timely adjustments.
Personal income tax deductions are currently a major concern, with many localities submitting specific proposals regarding this amount. This could involve a preliminary assessment of the living standards, income, and economic conditions of the locality.
However, there are discrepancies between the levels proposed by local authorities, and of course, these proposals do not accurately reflect the correlation between localities.
Under current conditions, the personal allowance cannot be a uniform figure. It needs to vary by region, depending on the economic conditions of that locality or region.
But determining the basis for calculating an appropriate number is not simple.
I agree with many suggestions that the minimum wage should be based on the regional minimum wage or the local GDP per capita.
Currently, localities with different socio-economic conditions are relatively reflected in the GDP per capita figures, which reflect the income and spending capacity of the people, but there are also quite large disparities.
For example, even among high-income localities, there are disparities. In 2024, this figure was approximately US$7,600 per person for Ho Chi Minh City and US$7,250 per person for Binh Duong. Meanwhile, Quang Ninh reached approximately US$10,270 per person, and Ba Ria - Vung Tau exceeded US$18,200 per person.
Meanwhile, for low-income provinces like Bac Kan, the figure is only about $2,270 per person, a difference of 3-4 times. Therefore, relying solely on GDP per capita will not fully reflect the actual balance of income and expenditure of the people.
As for regional minimum wages, we currently have four regions, with the highest being region 1 at 4.96 million VND/month and the lowest being region 4 at 3.45 million VND/month, meaning there is only a difference of about 1.5 times.
Looking at the relative levels of current income and expenditure across regions, we can see fairly similar disparities in terms of regional minimum wages as mentioned.
Therefore, I believe that basing the determination of the personal allowance deduction on the regional minimum wage is relatively appropriate. In addition, the GDP per capita could be used as a supplementary or reference criterion.
What level is appropriate?
Regarding personal allowances, accurately determining people's spending needs is not easy. We can only calculate based on average spending needs, under the given circumstances.
The personal allowance can be determined in relation to the country's GDP growth rate (as the economy grows, people's income inevitably increases, prices and spending also rise, and the rate of revenue mobilization for the state budget also increases...).
In 2007, when the Personal Income Tax Law was enacted, the personal allowance was 4 million VND/month for taxpayers and 1.6 million VND/month for dependents, while the GDP per capita was 919 USD.
By 2024, the average GDP will be approximately $4,700, an increase of about 5.1 times compared to 2007.
Therefore, when amending the Personal Income Tax Law this time, it is appropriate to base the personal allowance deduction on the GDP per capita in 2024 at approximately 20 million VND for taxpayers and 8-9 million VND for dependents, applicable to Zone 1 (large cities).
It is also necessary to gradually narrow the gap between the spending needs of taxpayers and their dependents to align with current realities.
Other regions adjust the personal allowance deduction downwards relatively in line with the minimum wage in the remaining regions, with the lowest being Region 4 at approximately 15 million VND for taxpayers and 6-7 million VND for dependents.
In addition, it is necessary to reduce the number of income tax brackets, lower the tax rates for lower brackets and raise the tax rates for higher brackets to increase income regulation and narrow the national gap between rich and poor...
At the same time, it is necessary to regulate a more flexible mechanism and authority for adjusting the personal allowance deduction, in the direction of entrusting the Government with the consideration and decision, which is appropriate.
Source: https://tuoitre.vn/giam-tru-gia-canh-theo-luong-toi-thieu-vung-muc-nao-phu-hop-20250210082537228.htm
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