The Long-Awaited Revision of the Personal Income Tax Law

“Tax Burdens on the Wage Earners”

The majority of salaried workers express that the personal exemption of VND 11 million per taxpayer per month and VND 4.4 million per dependent per month is outdated and insufficient to cover living and educational expenses.

Mr. Nguyen Hung from Hanoi, a salaried employee, shared that his total income is approximately VND 16 million per month, and he regularly has to pay personal income tax. Mr. Hung spends VND 8 million per month on rent alone, and in the past two years, his landlord has increased the rent every six months, citing reasons such as inflation, salary increases, and rising housing prices.

“Living expenses are continuously rising, and my wife just gave birth to our child. Our family is struggling to make ends meet. I have never felt life to be as challenging as it is now. While our income has decreased, our expenses have increased. Just as we were about to celebrate a salary increase, I had to worry about paying taxes. The dependent exemption of VND 4.4 million per month is too low and does not cover our costs,” shared Mr. Hung.

Ms. Nguyen Phuong, a salaried worker from Ha Dong, Hanoi, also faces a similar situation. Her monthly income is VND 18 million, and even after the personal exemption for her child, she still has to pay personal income tax. According to Ms. Phuong, the tuition, meals, and boarding fees for a public elementary school student amount to nearly VND 2 million.

“In addition to school, children attend various extracurricular classes, such as English and talent development. Working parents have to incur additional expenses for transportation. The personal exemption of VND 4.4 million per month for a dependent is not enough. This amount should be doubled at the very least to cover living expenses in major cities like Hanoi and Ho Chi Minh City,” suggested Ms. Phuong.

In contrast to the challenges faced by taxpayers, revenue from personal income tax continues to increase. In the first six months of 2024, personal income tax revenue reached nearly VND 100,000 billion, surpassing revenue from state-owned enterprises by nearly VND 840 billion. The total personal income tax revenue in 2023 exceeded VND 155,000 billion, with tax on salaries and wages accounting for the highest proportion, amounting to VND 108,228 billion (approximately 70% of total personal income tax revenue).

A representative from the Department of Small and Medium Enterprise Tax Management, Business Households, and Individuals (General Department of Taxation) shared with Tien Phong that they are in the process of compiling difficulties and obstacles related to personal income tax policies and tax administration laws, as reported by tax authorities at different levels and taxpayers. The tax authority is committed to researching and proposing amendments to personal income tax policies and tax administration laws.

Proposal to Adjust Personal Exemptions Based on Regions

Earlier in 2024, the Government requested the Ministry of Finance to study and propose adjustments to the personal exemption amount in the calculation of personal income tax to support and alleviate the difficulties faced by the people.

Professor Dr. Hoang Van Cuong, former Vice Rector of the National Economics University, stated that the objective of personal income tax is to redistribute income between high-income and low-income individuals. Although the tax has been adjusted three times, the personal exemption amounts of VND 11 million per taxpayer per month and VND 4.4 million per dependent per month are no longer appropriate.

According to Mr. Cuong, consumption levels vary across regions. In cities, the personal exemption of VND 4.4 million per month for a child’s education is insufficient. The recent salary increase was offset by the additional tax burden, reducing its impact.

Mr. Cuong proposed that the authorities should determine an appropriate tax threshold to ensure that taxpayers’ livelihoods are not affected while contributing to the state budget. He also suggested allowing deductions for reasonable expenses that individuals can justify.

Sharing the same view, economic expert Dinh Trong Thinh emphasized the need to adjust the tax threshold and personal exemption amounts based on regions. For large cities like Hanoi and Ho Chi Minh City, the household expenditure and tax threshold for taxpayers should be increased to around VND 16-18 million, and the personal exemption for dependents should be raised to VND 6-8 million. According to Mr. Thinh, these amounts would ensure that taxpayers can support their young children and elderly parents.

“The authorities should reconsider the personal exemption in personal income tax. Many countries allow for the exclusion of reasonable expenses, such as unexpected medical costs or investments, when calculating personal income tax,” suggested Mr. Thinh.