Raising family circumstances-based reduction level must comply with current law

	Business households have been offset Family Circumstance Deduction when calculating Personal Income Tax
	Raising deduction for family circumstance will reduce difficulties for taxpayers
	Adjustment of deductions for family circumstance consistent with price fluctuation

Tax finalization

44% of taxpayers will not have to pay anymore

The Government's dispatch clearly states that under the provisions of Clause 4, Article 1 of Law No. 26/2012 / QH13 (Law on Personal Income Tax), in case the Consumer Price Index (CPI) changes over 20% compared to the effective time of the Law or the latest point of adjusting the family circumstance-based reduction, the Government submits to the Standing committee of the National Assembly for adjustment of the family circumstances-based reduction specified in this clause in conformity with changes of price in order to apply for the next tax term.

According to the General Statistics Office, the CPI at the end of December 2019 compared to July 1, 2013 was 123.2%, up 23.2%. Based on the provisions of Clause 4, Article 1 of Law No. 26/2012 / QH13, it is necessary to study the adjustment of family circumstance-based reduction for personal income tax.

Accordingly, the Government proposes to adjust the family circumstance-based reduction level specified in Clause 1, Article 19 of the Law on Personal Income Tax (amended and supplemented in Clause 4, Article 1 of Law No. 26/2012 / QH13 ) as follows: The deduction level for taxpayers is VND11 million per month (VND132 million per year); the deduction level for each dependent is VND4.4 million per month.

The Ministry of Finance says that the above upward revision of the family circumstances-based reduction will contribute to reducing difficulties for taxpayers in the context of increases in prices and inflation compared to 2013.

The amount of tax payable will be reduced for all taxpayers, in which the reduced tax amount of the group of taxpayers at the lower tax level will be higher than the taxpayers at the high tax level.

Thus, a large proportion of people who are paying personal income tax at level 1 (accounting for 44% of personal income taxpayers) will turn to non-taxpayers. For people with income of VND20 million per month with two dependents, their monthly personal tax payable is only 0.05% of their income (VND10,000 per month). People with incomes below VND15 million per month with dependents will not have to pay taxes.

Raising deduction level must comply with the Law

When organizing public consultations before submission, the drafting agency has received many controversial opinions around the aforementioned raise. Some say that it should be raised more than the draft.

Explaining this issue, the Ministry of Finance said that it could be impossible, because the adjustment of family circumstances must comply with the Law on Personal Income Tax. That is, based on the CPI from effective time of this Law (July 1, 2013) to adjust the family circumstances-based reduction level in conformity with the price fluctuation. The adjustment of family circumstances-based reduction level according to other criteria must be amended and supplemented in the Law and within the competence of the National Assembly.

When consulting on the draft, many experts agreed that the aforementioned level was suitable with the current conditions, ensuring the harmony of interests of the State and taxpayers. Mr. Tran Quang Chieu, Standing Member of the National Assembly's Finance and Budget Committee, commented: The Ministry of Finance's adjustment based on CPI was absolutely reasonable with the current law. Because this adjustment is based on the provisions of Clause 4, Article 1 of Law No. 26/2012 / QH13. Under the law, the Ministry of Finance based on consumer price index CPI to adjustfamily circumstances-based reduction is legal. "With other criteria such as: GDP per capita, regional minimum wage, social average income and spending, the Ministry of Finance should study and consult when amending regulations on family circumstances-based reduction in the Law on Personal Income Tax later," Mr. Chieu said.

Through research and review, the Ministry of Finance found there are many other issues to be reviewed and amended in the Law on Personal Income Tax, such as reviewing and expanding taxable income; considering and adjusting the tariff; subjects entitled to tax exemption and reduction; and amending regulations related to tax finalization and tax refund.

Therefore, the Ministry of Finance is reviewing the results of the implementation of the tax system reform strategy for the 2011-2020 period and researching and developing the tax system reform strategy for the 2021-2030 period to submit to the Prime Minister. Thereby, the Ministry will develop the revised Tax Laws (including the amended Law on Personal Income Tax) to submit to the competent authorities at an appropriate time.