Should the personal income tax law be amended before 2026?
The prices of goods and services have increased by many times in the last few years, but the deductions for family circumstances set by the PIT Law remain unchanged. The taxation threshold of VND11 million a month for taxpayers and the deduction for family circumstances for dependent family members of 4.4 million are expected to not be enough to cover basic needs for people, especially in Hanoi and HCM City.
Nguyen Thi Luyen in Hai Ba Trung district, in Hanoi, an accountant for a food company, receives VND15 million a month in wages. She said she has to think carefully before buying anything, as the income is limited and goods prices have increase.
Luyen has a daughter, and doesn’t have to pay PIT. Meanwhile, her husband, also an employee, who receives pay of VND12 million a month, has to pay the tax.
“Our total incomes are just enough to cover basic needs, including daily meals, electricity and water bills, and the study of our daughter. Everything is getting more and more expensive,” she complained, adding that after two years of the pandemic, it would be reasonable if the deductions for family circumstances are raised, or the tax rates are lowered.
Thu Huong in Hoang Mai district In Hanoi, also thinks the PIT Law has become ‘out of date’. Her mother, a retired worker, receives a pension of VND4 million a month. The mother not only has to spend money on food, but also on medicine.
“My sister and I have to give money to our mother every month to support her, but the money is not subject to deduction for family circumstances. This is because under the current law, those who have an income of over VND1 million a month are not listed as ‘dependent people’,” she said.
When to amend the law?
Dinh Trong Thinh, a respected economist, noted that the PIT Law should have been amended a long time ago, and adjustment in 2026 is too late.
According to Thinh, the taxation threshold is adjusted at times, but only when the inflation rate is over 20 percent.
“As average living standards in society have improved, the taxation threshold needs to be raised to ensure new living standards for taxpayers,” he said
“With VND4.4 million a month (deduction for family circumstances), parents cannot raise a child in HCM City and Hanoi, and cannot provide for parents who are old and need more healthcare services."
The expert said that tax rates need to be simplified to make it more reasonable and acceptable.
A member of the Executive Committee of Vietnam Tax Consultant Association and CEO of Trong Tin Accounting and Tax Consulting, told VietNamNet that once a policy is no longer reasonable, it must be amended as soon as possible.
Some analysts suggest setting deductions for family circumstances based on the regional minimum wage. However, Duoc doesn’t agree, saying that the minimum wage varies for different regions.
He said personal income tax rates should be based on the consumer price index (CPI) and macroeconomic factors.
“Under the current law, only when the CPI increases by 20 percent will the government submit to the National Assembly Standing Committee plans to adjust deductions for family circumstances. This is the unreasonable point of the PIT Law,” he said.
“A policy is considered reasonable only if it can ensure all macroeconomic factors, and harmonized benefits of people, enterprises and state budget collection,” he added.