Changes to the Progressive Tax Schedule from 2026: A Turning Point for Workers’ Income
In the context of a volatile global economy and the increasingly expensive cost of living in major cities in Vietnam, current personal income tax (PIT) policies have revealed many inadequacies. Facing pressure from public opinion and the practical needs of the people, the Government has officially included the amendment of the Law on Personal Income Tax in its roadmap. The centerpiece of this reform is the plan to Change the progressive tax schedule from 2026, promising to create a major boost, helping to reduce the financial burden for millions of workers and stimulating domestic consumer demand.
This adjustment is not merely a change of numbers on paper, but also a reflection of a new management mindset: nurturing the source of revenue instead of excessive collection. According to economic experts, the current tax schedule with 7 brackets and family deduction levels has been maintained for too long, no longer keeping pace with the rate of inflation and the increase in the Consumer Price Index (CPI). Therefore, the roadmap to change the progressive tax schedule from 2026 is expected to bring more fairness, especially for middle-income wage earners.
So what are those specific changes? Who will benefit the most and how will it impact your wallet? Let’s analyze the detailed change scenarios and the implementation roadmap in the article below.
Why is it necessary to change the progressive tax schedule right now?
The current partial progressive tax schedule consists of 7 brackets, with the lowest tax rate at 5% and the highest at 35%. However, the gaps between tax brackets are too narrow and low taxable income levels have caused many people who have just escaped poverty to fall into the tax-paying category. Here are the urgent reasons leading to the change of the progressive tax schedule from 2026:
- The obsolescence of family deduction levels: The deduction level of 11 million VND for oneself and 4.4 million VND for dependents has been applied since 2020. With current inflation, this amount only covers the most basic needs, not including medical costs, high-quality education, or entertainment.
- Too many tax brackets: There are currently 7 tax brackets, but the gaps between the first brackets are very narrow. For example, bracket 1 (up to 5 million) and bracket 2 (over 5 to 10 million) cause workers with a slight increase in income to jump a tax bracket, creating psychological pressure and reducing motivation to increase labor productivity.
- Inflation pressure: When commodity prices rise, people’s real income decreases. If the tax schedule does not change, people are paying taxes on a portion of income that should have been spent on essential expenses.
Scenarios for changing the progressive tax schedule from 2026
Although the official document is still in the process of being drafted and consulted, the main proposed directions for changing the progressive tax schedule from 2026 are focusing on two major options:
1. Reducing the number of tax brackets from 7 to 5
This is the option most supported by many experts. Reducing the number of tax brackets will help simplify tax management and calculation. At the same time, widening the gaps between brackets will help low and lower-middle-income earners significantly reduce the amount of tax payable. For example, instead of the 5% rate for the first 5 million VND, bracket 1 could be expanded to 10 million VND or more.
2. Adjusting tax rates in the lower brackets
Another direction is to keep the number of brackets the same but reduce the tax rates in the first brackets or increase the starting taxable income level. Changing the progressive tax schedule from 2026 in this direction will directly support vulnerable groups in society, helping them have a small extra accumulation to improve their quality of life.
Impact of changing the tax schedule on workers
When the roadmap for changing the progressive tax schedule from 2026 is implemented, the most obvious impact will be an increase in the “take-home pay” of workers. Let’s look at specific target groups:
- Income group from 15-25 million VND/month: This is the group that benefits the most. Currently, this group is subject to tax at bracket 2 or bracket 3. If the tax brackets are widened, they may only have to pay at bracket 1 or a significantly lower tax rate.
- High-income group: Although the main goal is to support low-income earners, adjusting the upper tax brackets also helps the high-income group feel more fairness, thereby limiting tax evasion or income shifting.
- Businesses: When employees have higher real income, job satisfaction increases, helping businesses reduce the pressure to increase salaries periodically to compensate for inflation for employees.
Implementation roadmap and things to note
According to the plan of the Government and the National Assembly, the draft Law on Personal Income Tax (amended) will be included in the 2025 law-making program. After discussion and approval, the change to the progressive tax schedule from 2026 will officially take effect. This means that from now until then, workers will still apply the current tax schedule.
However, taxpayers should note a few points to prepare for this change:
- Update tax registration information: Ensure that information about dependents is always accurately updated to take full advantage of new deduction levels (if any).
- Monitor guidance documents: When the new law is promulgated, there will be detailed circulars guiding how to finalize taxes for the transition year.
- Personal financial planning: With the additional income from the reduced tax portion, you should have a plan to reinvest or save instead of spending wastefully.
Comparison with countries in the region
Looking at neighboring countries such as Thailand, Singapore, or Malaysia, we see that their tax schedules are often more flexible and have very high family deductions compared to per capita income. Changing the progressive tax schedule from 2026 will bring Vietnam’s tax system closer to international standards, creating an attractive investment environment to attract foreign experts to work.
At Singapore, tax rates are very low and the threshold to start paying tax is very high. Meanwhile, in Vietnam, although it is a developing country, the ratio of PIT to the total income of a segment of workers is equivalent to that of developed countries. Therefore, the 2026 reform is an inevitable and correct step.
Conclusion
Changing the progressive tax schedule from 2026 is not only a technical requirement in public financial management but also an important social security policy. It demonstrates the State’s concern for the people’s lives, helping to ease the burden on the people and promote sustainable economic development. Although it is nearly two years until the time of implementation, expectations for a fair and reasonable tax schedule are creating positive signals in the psychology of workers.
Let’s wait for the final decisions from the authorities. Hopefully, with the change of the progressive tax schedule from 2026, every tax dollar paid will truly become a resource for nation-building, and every worker will feel worthy of the effort they put in.
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