For the first time in years, in the newly released draft of the Personal Income Tax Law (replacement), the Ministry of Finance is discussing redefining the method of calculating personal deductions, including consideration of healthcare and education expenses.

Speaking with VnExpress, Nguyen Thuy Duong, Director and Head of Personal Income Tax Consulting at KPMG Vietnam, assessed this draft as a positive turning point from the government, demonstrating a fair and reasonable approach to taxation.

The government proposes to expand the list of essential expenses deductible from taxable income, such as healthcare and education expenses for taxpayers and dependents. This level will be regulated by the government.

Instead of applying a "one-size-fits-all" model for everyone, applying specific deductions like education and healthcare helps the tax policy accurately reflect the living context and actual affordability of each individual, Duong stated.

"With the same income level, people raising young children, caring for elderly parents, or bearing the costs of treating chronic illnesses clearly have different tax burdens," the KPMG expert added.

The calculation of specific expenses such as healthcare and education is widely supported by experts. Do Quoc Tuan, a former official of the Ho Chi Minh City Tax Department, pointed out the reality: "Some workers have to sell assets or borrow money to cover treatment costs for their spouses, children, or relatives with serious illnesses, but currently they are still subject to personal income tax. This is completely unreasonable."

This expert recommends including the cost of treating serious illnesses in personal deductions, supported by invoices and calculated based on actual expenses. Simultaneously, tuition fees from preschool, primary, and secondary school should also be included in personal deductions, and a ceiling should be applied to higher education costs.

Parents take their children to complete the 2022 graduation exam procedures at Phu Nhuan High School, Phu Nhuan District on 6/7/2022. Photo: Quynh Tran

Parents take their children to complete the 2022 graduation exam procedures at Phu Nhuan High School, Phu Nhuan District on 6/7/2022. Photo: Quynh Tran

According to the KPMG expert, the Ministry of Finance could consider expanding deductions to include housing rental costs or home loan interest - regular and essential expenses for most workers in large cities. These are fixed financial burdens that taxpayers find difficult to reduce, especially with rising housing prices.

Owning a first apartment/house is an essential and legitimate need for workers. However, according to the Deputy Director of the Housing Management and Real Estate Market Department (Ministry of Construction), in large cities, to own an average house (70 m², priced around 3-4 billion VND), young people need 20-25 years of income accumulation if they don't have financial support from their families or preferential credit programs.

The house price-to-income ratio is currently very high compared to the safe threshold (6-8 times income), posing a major obstacle for young people to access commercial housing.

As the government is also implementing policies to encourage young people to own their first homes, supportive tax policies for the workforce to "settle down and establish a career" are necessary.

Therefore, recognizing healthcare, education, and home loan interest expenses as deductible items not only reflects the actual remaining income more accurately but also, according to Nguyen Thuy Duong, demonstrates humaneness and encourages the stabilization of people's lives. "This is a fundamental factor in building a sustainable, committed, and productive workforce," she said.

Providing further suggestions for tax policy development, Nguyen Quang Huy, CEO of the Faculty of Finance and Banking at Nguyen Trai University, emphasized that tax policies should prioritize vulnerable groups such as single parents with young children, people with dependent elderly parents, and workers in the education, healthcare, and social sectors who are disadvantaged in terms of salary. The national interest here is to ensure social stability, retain high-quality human resources, and promote domestic consumption - a major driver for sustainable economic growth.

Based on international experience, specific deductions often consider the "behavior" of taxpayers' income use. These are deductions that taxpayers receive when meeting certain criteria, such as spending on government-encouraged items like education and healthcare. The scope of these deductions, according to each country's regulations, is also very diverse.

Currently, some countries allow deductions for social insurance and health insurance contributions to encourage people to participate, some countries deduct children's education expenses or deduct home loan interest (to encourage homeownership) or charitable contributions.

In addition to adding specific personal deductions, Do Quoc Tuan proposes increasing the deduction for dependents compared to the taxpayer. The current personal deduction rate for dependents is only 40% compared to the taxpayer, which, according to Tuan, is too low. "Meanwhile, raising a child can even incur actual expenses that are higher than those of the worker," he said.

According to a 2022 survey by VnExpress with over 23,900 readers having an average income of 22 million VND per month, taxpayers spend more than 10 million VND on themselves each month, but they spend at least 7 million VND to support one dependent - accounting for 70% of their personal expenses, much higher than the 40% rate determined by the Ministry of Finance.

Currently, some countries apply the same personal deduction rate for dependents as for taxpayers. Therefore, Tuan recommends increasing the personal deduction for dependents to at least 60% of that for the taxpayer.

Increasing the personal deduction rate for dependents, from the perspective of Nguyen Van Duoc, General Director of Trong Tin Accounting and Tax Consulting Company, is even considered one of the policies to "encourage childbirth" in the context where the cost of raising children is one of the reasons why young people are hesitant to have children.