Average spending on higher education in Vietnam has increased sharply since public universities transitioned to financial autonomy mechanisms. According to the 2024 resident living standards survey, average education spending per person has reached 9.6 million dong annually. However, that is the national average figure, including rural households with no children in college. For a middle-class family in Saigon or Hanoi, the actual figure could be many times higher. This is precisely the core gap that the draft Decree guiding the Personal Income Tax Law is attempting to address — but has not yet succeeded.
The Ministry of Finance proposes maximum deduction levels of 23 million dong annually for medical expenses and 24 million dong for education and training. At first glance, this represents notable progress compared to current law — the old mechanism had no separate deduction for these two categories but combined them into general household deductions. However, the issue does not lie in today's proposed level, but in the question: for how many more years will that level remain appropriate?
Fixed mechanisms represent an inherent weakness, not a technical flaw
This is not Vietnam's first encounter with this problem. The household deduction level — currently 11 million dong monthly for the taxpayer and 4.4 million dong for each dependent — has remained unchanged for many years while inflation and living standards continuously shift. The current Personal Income Tax Law only permits adjusting household deductions when accumulated CPI exceeds 20% — a threshold high enough that policy always lags behind reality. And when adjustments occur, the legislative process typically takes additional months, sometimes years.
Now, the draft Decree repeats this logic: fixing two numbers into regulatory text with no self-adjustment mechanism. This means that from the moment the Decree takes effect, the countdown to obsolescence has begun.
The Vietnam Academy of Social Sciences — a research unit under the state system — proposes developing an automatic adjustment mechanism based on consumer price index (CPI), average spending levels, or other macroeconomic indicators. Hue City People's Committee, meanwhile, suggests anchoring the deduction level to a reference ratio with base salary or household deduction level — a more flexible approach that avoids needing to amend the Decree each time prices fluctuate. Deloitte, in its role as tax consultant, directly identifies the problem: adjustment mechanisms for fixed amounts in a Decree typically cannot keep pace with market developments, and this is a foreseeable risk from the present moment.
The Ministry of Finance maintains its position, citing state budget balance considerations. This argument is not without foundation — expanding deductions means collecting less from personal income tax revenue. But this is a policy question, not a reason to entirely eliminate automation mechanisms. Many countries in the region have solved this through indexation of deduction thresholds to CPI, meaning deduction levels automatically increase slightly each year rather than remaining fixed and then adjusting abruptly after many years.
Hidden inequality in a "fair" single figure
Even setting aside the indexation issue, there remains another gap in the current design: the maximum deduction ceiling applies uniformly to all taxpayers, regardless of whether they have one or multiple dependents, live in urban or rural areas, or have children in secondary or tertiary education.
Hai Phong City People's Committee raises this contradiction directly: someone with one dependent and someone with three dependents both receive the same maximum deduction of 24 million dong for education. Canon Vietnam proposes a per-dependent deduction mechanism instead of a household-wide cap — a more technically sound solution, though administratively more complex.
The Vietnam Automobile Manufacturers Association (VAMA) puts forward perhaps the most compelling humanitarian proposal: do not apply a deduction ceiling for people with serious illnesses, but allow deduction according to actual expenses after subtracting insurance coverage. This is an expense no one can plan for, and 23 million dong — roughly 900 USD at current exchange rates — may equal only one chemotherapy session. VAMA's argument raises a more fundamental question: is the purpose of tax deduction to support people in genuinely difficult circumstances, or merely to reduce a portion of routine expenses?
Particularly notably, the American Chamber of Commerce in Vietnam (AmCham) highlights a significant asymmetry in the draft: medical and education expenses paid by employers for workers are completely exempt from personal income tax, unconstrained by amount or frequency. Yet when workers themselves pay out of pocket for themselves or dependents, they receive deduction only within set limits. This asymmetry not only creates unfairness between well-benefited and freelance workers — it also creates incentives for employers to "package" medical and education benefits into employment contracts to avoid tax, rather than paying higher salaries and letting workers decide.
Autonomous university tuition: The elephant in the room
VAMA further proposes tiered education deduction levels: 30 to 40 million dong for secondary education and 50 million dong for tertiary education. This proposal reflects an inescapable reality: since many Vietnam public universities transitioned to financial autonomy mechanisms, tuition has increased dramatically. Some leading public universities now charge 30 to 50 million dong annually, even higher for medicine, engineering, and business programs — meaning the proposed 24 million dong deduction level covers only about one-half to two-thirds of tuition, not counting textbooks, dormitory fees, or living expenses.
This is a point closely monitored by the Vietnamese community in America, as many overseas Vietnamese families have children studying in Vietnam — or are considering sending children to complete part of their university program there — and are calculating how the new tax policy will affect that decision. More importantly, for millions of families living in Vietnam receiving remittances from relatives abroad, those remittances substantially compensate for medical and education expenses. If the tax deduction policy becomes more effective, this burden could decrease — conversely, an outdated policy will sustain pressure on family remittance flows.
Vietnam currently ranks among Southeast Asia's largest remittance recipients — according to World Bank data, remittances to Vietnam in 2024 are estimated at around 16 billion USD, with the bulk coming from the Vietnamese American community. A significant portion is used to pay tuition and medical expenses. When the state designs tax deduction policy that cannot keep pace with actual costs, it is not merely a technical tax issue — it indirectly reinforces the dependence of many households on external income sources.
The Ministry of Finance is right in the short term, but lacks longer-term vision
One must acknowledge: the majority of opinions in this consultation round — including the Ministry of Culture, Sports and Tourism, Vietnam Chamber of Commerce and Industry (VCCI), Canon Vietnam, and many localities — support the Ministry of Finance's proposal. The main reason: the 23 and 24 million dong levels, while imperfect, remain considerably higher than actual average spending — according to the 2024 resident living standards survey, average healthcare spending is 3.5 million dong annually, and 9.6 million for education. The Ministry of Finance calculated the proposed deduction equivalent to 2.3 times and 2.5 times average spending respectively — meaning even for those spending above average, the deduction still provides coverage.
The Ministry of Finance also notes that taxpayers with monthly income above 28.63 million dong only begin paying 5% tax rate — this threshold, combined with the new deduction level, better protects low and middle-income earners compared to high-income earners. This is sound design.
However, the issue is not whether 23 or 24 million dong is reasonable at the moment of enactment — but whether it remains reasonable after 3 years, 5 years, or more, with no adjustment mechanism. Vietnam's tax legislative history shows that fixed amounts in Decrees typically persist much longer than anticipated, because amendment processes are costly administratively and politically. During that period, inflation in healthcare and education sectors — which typically exceeds overall CPI — will gradually erode the real value of the deduction level.
Technical solutions abound: anchor deduction levels to healthcare and education sector-specific CPI (rather than overall CPI), or calculate as a percentage of regional minimum wage, or simply authorize the Ministry of Finance to adjust on a regular biennial basis without amending the Decree. Quite possibly, in the next consultation round or when the Law is formally enacted, a periodic adjustment mechanism will be added — but without clear pressure from stakeholders, the Ministry of Finance has sufficient administrative reason to maintain the simpler approach: keeping the fixed number unchanged.
This debate, fundamentally, is not about tax. It is about whether a state should design policy according to "get it right once" principles or build institutions capable of adaptation. The correct answer is clear — but the path to achieving it still faces many obstacles.