Increase family deductions to match price index

Many ministries, departments, and localities have proposed raising the personal allowance to 16-18 million VND/month to better reflect current prices and living standards.

Many ministries, departments, and localities have proposed increasing the personal allowance to align with the current price index. Photo: Vu Long

The price index is rising, but the personal allowance remains unchanged.

The Ministry of Finance is conducting a comprehensive review and assessment of the Personal Income Tax Law, including the tax rates. Personal deductions, to be reported to the Government, the Standing Committee of the National Assembly and the National Assembly for consideration of amendments and additions.

Previously, many provinces, cities, and ministries proposed increasing the personal allowance. Many opinions suggested that the current allowance is no longer appropriate and should be raised to around 16-18 million VND per month to ensure fairness for taxpayers in the context of rising living costs.

According to current regulations, the personal allowance for taxpayers is VND 11 million per month and VND 4.4 million per month for each dependent. This amount was adjusted in 2020, after remaining unchanged since 2013.

Amid rising living costs, many localities believe the current personal allowance is no longer adequate. According to data from the General Statistics Office, Vietnam's consumer price index (CPI) has maintained an average increase of 3.5-4% annually, causing the real value of the personal allowance to diminish. Since the last adjustment in 2020, average prices have increased by approximately 10-15%, while the personal allowance has remained unchanged.

According to the current regulations in the amended Personal Income Tax Law of 2012, if the Consumer Price Index (CPI) increases by more than 20% compared to the time the law came into effect or the most recent adjustment, the Government will submit a proposal to the National Assembly Standing Committee to consider adjusting the personal allowance to reflect price fluctuations. However, many opinions suggest that this regulation is still rigid and does not reflect socio -economic changes in a timely manner.

Many ministries, departments, and localities have proposed increasing the personal allowance to a minimum of 16 million VND/month for taxpayers and 5-8 million VND/month for each dependent, in order to match current living standards and costs.

Accordingly, the Ministry of National Defense proposed increasing the tax deduction to 17.3 million VND/month for taxpayers and 6.9 million VND/month for dependents. Ha Tinh province proposed a higher amount, with 18 million VND/month for taxpayers and 8 million VND/month for each dependent. Son La province proposed applying a rate of 16 million VND/month for taxpayers and 5 million VND/month for dependents.

Many citizens and experts agree.

From the perspective of the public, many expressed agreement with raising the personal allowance. Ms. Nguyen Thanh Mai (Hoang Mai district, Hanoi), an office worker, shared: "My salary is about 15 million VND/month, but living expenses take up almost all of it. If the personal allowance remains at the current level, I still have to pay taxes, while in reality I don't have much money left over. Raising it to 16-18 million VND/month would be more reasonable."

Meanwhile, Mr. Le Trung Kien (Hai Ba Trung District, Hanoi) suggested that regional factors should be considered when making adjustments: "The cost of living in Hanoi is much higher than in other provinces. A single general personal allowance deduction is not truly fair. Consideration should be given to deductions based on region, similar to regional minimum wages."

Agreeing with this proposal, Dr. Dinh The Hien, an economic expert, shared: "This is a very welcome proposal; people have been waiting for this for a long time. If it can be implemented, it would be very reasonable."

The expert analyzed: "The personal allowance is based on the minimum living standard to avoid personal income tax. Adjusting this amount must be carefully studied and calculated. But clearly, considering inflation, the average annual increase is 3.5-4%. Therefore, the personal allowance must also increase proportionally with Vietnam's core inflation rate to ensure its real value does not diminish."

Dr. Dinh The Hien also pointed out that the delay in adjusting the personal allowance deduction is causing disadvantages for workers. “From the time of issuance to the time of adjustment, the process is often lengthy. Before amendments, research and approval by the National Assembly are required, resulting in a certain delay. Therefore, taxpayers – especially workers – always suffer due to currency devaluation. This shows that the personal allowance deduction needs to be adjusted promptly to match the price index and ensure fairness for taxpayers,” the expert emphasized.

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