Proposal to calculate family deduction by region

Currently, the family deduction for individual taxpayers is 11 million VND and each dependent is 4.4 million VND, maintained from July 2020. Individuals are deducted for insurance, family deductions, allowances, subsidies..., the remaining amount is the income used to calculate personal income tax. However, this deduction is considered inappropriate in calculating personal income tax, when spending and living are increasingly expensive.

Recently, the Ministry of Finance said that in the draft proposal for law making, it has set out the determination of family deduction levels based on many factors, in which the regional minimum wage is a reference basis for determining family deduction levels.

The operator sees the regional minimum wage as having the meaning of compensating for inflation, improving the lives of workers, and being consistent with economic growth. This wage also helps differentiate the living standards and costs of workers in different regions.

At the same time, the drafting agency also researched and adjusted the family deduction level according to price fluctuations and living standards in the recent period and forecasts for the coming time. The designed policies also ensure the goal of not reducing the role of personal income tax in the tax system.

The Ministry of Finance released the above information after receiving many opinions on this issue. Accordingly, Bac Giang province, when giving comments on the proposal to develop the draft Law on Personal Income Tax (replacement), said that the application of the deduction level must be suitable to the practical living conditions of each region and area in the country instead of applying a single level as it is now.

The Ministry of Information and Communications (formerly) also proposed to develop a deduction level in accordance with the Government's minimum wage policy for four regions.

Some other opinions said that the cost of living in each region and locality has a huge difference, including important factors such as the difference in real estate prices, food, consumer goods, services... Therefore, dividing the family deduction levels by region will ensure fairness in tax policy and workers' lives.