Using tax deductions to attract high-quality human resources

Raising family circumstance-based deductions

According to the Government’s recent submission to the National Assembly on the amended Personal Income Tax Law, the deduction for taxpayers themselves is proposed to be raised to 15.5 million VND per month, and to 6.2 million VND per month for each dependent. However, experts argue that this deduction level merely covers the most basic expenses of taxpayers.

Nguyen Thai Son, former Head of Personal Income Tax at the Ho Chi Minh City Tax Department, said the proposed deduction level is not satisfactory. In essence, the deduction for family circumstances before calculating personal income tax for salaried individuals is intended to ensure that each individual retains essential expenses to meet basic survival needs such as food, accommodation, transport, education, and healthcare. Only income after these essential expenses should be subject to personal income tax.

Therefore, Nguyen Thai Son proposed that the deduction for taxpayers should be increased to 16.6 million VND per month, and 6.6 million VND per month for each dependent.

Similarly, Nguyen Duc Nghia, Deputy Director of the Legal Consultancy Centre under the Ho Chi Minh City Business Association (HUBA), suggested that the deduction should be raised to 16.5 million VND per month for taxpayers, and 6.6 million VND per month for dependents.

According to Nguyen Duc Nghia, Viet Nam’s Consumer Price Index (CPI) includes 752 goods and services, yet in practice, citizens consume only a small number of essential items from the CPI basket — and these essentials have seen significant price increases over the past five years. He predicted that the price index for basic goods could increase by nearly 50% by the end of 2025, making a 50% increase in family circumstance deductions — such as the proposed rates — reasonable.

Arguing that current deductions have become outdated compared with inflation and rising living costs, Associate Professor, Doctor Tran Van Tung, Dean of Finance–Commerce at Ho Chi Minh City University of Technology (HUTECH), proposed raising the deduction for taxpayers to 18 million VND per month. This figure is based on calculations of basic living expenses (food, housing, transport, healthcare, and basic education) in major cities, which have already exceeded 15 million VND per month.

In addition, the deduction for each dependent should be increased to 7.5 million VND per month. At the same time, an automatic adjustment mechanism should be established, with a clause added to the law stating that when the CPI fluctuates by more than 5% from the time the law takes effect, or since the most recent adjustment, the Government shall submit to the Standing Committee of the National Assembly an automatic adjustment to the deduction level — without needing to wait for a full amendment of the law.

Increasing human resources competitiveness through tax deductions

In the context of Viet Nam’s deepening international economic integration, and increasingly fierce competition for talent — especially high-quality human resources — experts believe that tax deductions are the “key” to making Viet Nam more attractive to talent compared with other countries in the region.

According to Associate Professor, Doctor Tran Van Tung, the current tax brackets are positioned too closely around low- and middle-income levels, causing workers to quickly fall into higher tax brackets even with modest pay rises. In comparison with Southeast Asian countries, Malaysia’s top marginal rate is 30%, the Philippines 35%, and Thailand 35%. However, their income thresholds for the highest tax rates are significantly higher, while Singapore — despite its high level of development — applies a top tax rate of only 24%.

He also noted that the draft proposal to reduce the number of tax brackets from seven to five is reasonable and consistent with global trends towards simplification. However, instead of maintaining the highest tax rate of 35% as at present, the income range of each tax bracket should be widened and the top rate reduced to 30% to enhance competitiveness in attracting talent, foreign specialists and high-quality workers compared with neighbouring countries.

Commenting on the draft amended Personal Income Tax Law, Doctor Tran Trung Kien from the Faculty of Public Finance (University of Economics Ho Chi Minh City) said that the proposed policy on exempting or reducing personal income tax on wages, and salaries of scientists engaged in key national scientific, and technological missions is appropriate.

This policy helps reduce financial burdens, creates motivation for innovation and dedication, encourages domestic scientific research activities, and enhances competitiveness with regional and international markets in attracting talent. At the same time, it reflects the State’s respect and appropriate incentives for the intellectual community. “This is not only a financial incentive but also a positive policy message intended to attract and retain high-quality human resources at home and overseas Vietnamese scientists wishing to contribute to the homeland,” Doctor Tran Trung Kien emphasised.

Appreciating that the draft amended law includes deductions for healthcare and education expenses, lawyer Vo Thanh Hung, former tax officer in Ho Chi Minh City, proposed that family circumstance-based deductions should be applied fairly rather than uniformly, because living costs in major cities such as Ho Chi Minh City and Ha Noi are significantly higher than in remote or rural areas. Viet Nam has six types of urban classifications, and deduction levels should reflect these categories.

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