The family tax deduction is an amount deducted from an individual’s taxable income to calculate a more reasonable personal income tax rate for income earners. This is a government policy tool designed to reduce the tax burden on taxpayers, especially those responsible for supporting a family.
According to the Personal Income Tax Law that regulates the family tax deductions, the personal deduction for the tax payer is VND11 million per month and the deduction for each dependent is VND4.4 million per month.
The Personal Income Tax Law also regulates that in cases where the Consumer Price Index fluctuates by more than 20% compared to the time the law took effect, family tax deduction adjustments will be considered.
National Assembly deputies of Ho Chi Minh City recently sent a report to the legislative body, proposing adjusting the family tax deduction rate to better align with current socio-economic conditions.
This proposal has also been repeatedly mentioned by experts, who argue that the current approach to family tax deduction adjustments remains inadequate.
In a report, the Ministry of Finance replied that it’s not the right time to consider family tax deduction adjustments.
The ministry cited data from the 2023 living standards survey released by the General Statistics Office, showing Vietnam’s average monthly income per capita stands at VND4.96 million. The highest income group (including the top 20%) had an average monthly income of VND10.86 million per person.
Meanwhile, current deductions for taxpayers can add up to VND11 million per person per month, or over twice the average income per capita. This number is much higher than the typical range applied by other countries, in which deductions range from 0.5 to 1 times the average income.
With the current calculation method for deductions, taxpayers themselves, after deducting social insurance, health insurance, unemployment insurance, and other contributions, still do not have to pay their personal income tax, the ministry reasoned in its report.
In addition, it noted that the Consumer Price Index has not fluctuated by 20% since the last adjustment of the family tax deduction level in 2020, citing statistics indicating that the Consumer Price Index increased by 3.23% in 2020, 1.84% in 2021, 3.15% in 2022, and 3.25% in 2023.
“It is not possible to adjust the family tax deduction rate at the moment,” concluded the Ministry of Finance.
The Ministry of Finance stated that the personal income tax regulates an individual’s income. The implementation of this tax policy plays a crucial role in carrying out redistribution policies.
Along with other revenue sources, the revenue from the personal income tax has contributed to the state budget, which meets various investment development needs, national security and defense, social welfare assurance, and poverty reduction efforts.
