On the reasonableness of introducing a special tax to finance state support measures for families with children

Mel'nikova Nadezhda Petrovna PhD in Economics Professor; Department of Taxes and Tax Administration; Financial University Leading Researcher; Center for Scientific Research and Strategic Consulting; Financial University 15 Verkhnyaya Maslovka str., Moscow, 127083, Russia nadejdamelnickowa@yandex.ru

Yudin Evgenii Sergeevich Student; Faculty of Finance; Financial University 117198, Russia, Moscow, Ostrovityanova str., 9 k. 5 lemiy2@mail.ru

Introduction

One of the limiting factors for the successful solution of the task of ensuring economic growth is the problem of low birth rate. In the Message of the President of the Russian Federation to the Federal Assembly dated February 29, 2024, it was noted that "in the next six years we must achieve a steady increase in the birth rate..." (Text online broadcast of the Message of the President of the Russian Federation to the Federal Assembly, 02/29/2024 (accessed 03/19/2024) electronic link- URL: https://rg.ru/2024/02/29/tekstovaia-onlajn-transliaciia-poslaniia-prezidenta-rf-federalnomu-sobraniiu.html).

Figure 1 shows the dynamics of the birth rate in the country in the period from 1950 to 2022.

Source: compiled by the authors based on data from the Federal State Statistics Service.

Figure 1. Birth rates in the USSR up to and including 1991 and the Russian Federation in the period 1991-2021, people.

In the period 1950- 1960 in the USSR, as in all European countries and in the USA, there was a post-war baby boom, which had objective reasons. In the following decade (1960-1970), there was a sharp decline in the birth rate in the USSR. A certain increase in the birth rate in 1970 – 1990 was due to the adoption of a number of successful state social policy measures. For example, in the early 80s, positive dynamics were associated with a "surge in the birth rate of the second child." The beginning of the 90s of the 20th century went down in history as a "demographic pit". The sharp decline in the birth rate was associated with great economic difficulties for the population during the transition and the formation of a market economy in the country. The economic successes of the noughties and early fifties had a positive impact on the growth of the birth rate. However, since the mid-1980s, there has been a significant decrease in the birth rate in the country again.

To maintain the population at the level of 2023, it is necessary that one woman has a fertility rate of 2.15 (per married couple, this indicator is 2.7). In 2022, this coefficient was only 1.45, and it continues to decrease (Federal State Statistics Service, Demographic Yearbook of Russia. 2023: Stat. sat./ D 31 Rosstat. - M., 2023. – 256 p. electronic link - URL: https://rosstat.gov.ru/storage/mediabank/Demogr_ejegod_2023.pdf (date of access: 04/16/2024).

The National project "Demography" (implementation period from January 1, 2019 to December 31, 2024), as well as the launch of a new national project "Family", are aimed at solving the problem of increasing the birth rate in the country. Both national projects provide for a set of measures to support families with children and key indicators of funding volumes.

According to a number of politicians and public figures, a tax on "bachelors" may become one of the tools for increasing the birth rate. For example, in 2017, Deputy Chairman of the Moscow City Duma Nikolai Gubenko proposed to return to the tax "on bachelors", and direct the money from its proceeds to needy families with children. In 2020 Tatyana Butskaya, Chairman of the Board of the all-Russian public organization Council of Mothers, also spoke in favor of levying such a tax at a rate of 500 rubles. In 2023, Evgeny Fedorov, a member of the budget and Taxes committee of the lower house of parliament, recalled the expediency of returning to the USSR's experience in levying taxes on bachelors. Currently, the issue of reviving the bachelor tax is not raised in scientific articles due to the ineffectiveness of its regulatory impact, which has been proven by historical experience. This article discusses the possibility of introducing a tax on citizens who do not have children, but on fundamentally different grounds. The expediency of giving this tax the status of a special tax, which will be used to finance state support measures for families with children, is substantiated. The abstraction of a tax payment is not an essential feature of taxes (unlike imperative, legal, individually gratuitous taxes), which historically manifested itself in the presence of special taxes. It is financial measures of state support for families with children that can currently become a key factor in solving the acute problem of increasing the birth rate in the Russian Federation.

The results of the study

1. Historical background

In the USSR, the tax on bachelors, single and small-family citizens was introduced at the beginning of the Great Patriotic War (based on Decrees of the Presidium of the Supreme Soviet of the USSR dated November 21, 1941 and July 8, 1944) and lasted until January 01, 1991 (Table 1) ^[19]. In everyday speech, this tax was called the "childlessness tax" or the "bachelor tax."

Table 1 – Characteristics of the tax elements for bachelors, single and small-family citizens

Source: compiled by the authors according to ^[17].

The main purpose of the introduction of this tax was the need to replenish state budget revenues during the Great Patriotic War ^[7]. Soviet economists believed that the role of this tax was to attract funds from childless citizens to government expenditures on public education of children and the maintenance of children in orphanages (during the war and post-war period, the number of orphanages for orphaned children objectively increased), providing assistance to large families and single mothers ^[9]. This tax was also considered as a tool of indirect government influence on the demographic situation in the country ^{[12, 13, 18]}. It should be noted that in the USSR, the tax on bachelors, single and small-family citizens could not fully realize its stimulating role in increasing the birth rate, which was reflected in Figure 1.

The tax on "childlessness" was levied not only in the USSR. He has deep historical roots. In ancient Rome, the law of Papias and Poppaea introduced the obligation of marriage for certain classes, imposed restrictions on civil rights for bachelors and the childless, and provided Roman citizens (including women) with three or more children with advantages, for example, freeing the mother of three children from custody (Historical demography: population of Ancient Rome, electronic link - URL: https://athanatoi.livejournal.com/52445.html (date of access: 04/16/2024)). Unmarried and childless men, unmarried women, as well as citizens who were married but had no children, were required to pay a special tax. The law was introduced during the reign of Octavian Augustus in order to strengthen moral foundations in connection with the disintegration of society caused by the instability of economic and political life. In addition, during the previous and ongoing wars, there was a shortage of soldiers in the army, which required increased reproduction of the population. However, despite all efforts to increase the birth rate, the law has not produced the desired results. Population growth was noted after the cessation of wars and the stabilization of peaceful life ^[10]. In the 15th century, a childless tax existed in the Ottoman Empire. In England, this kind of tax was levied in 1695-1705. (The Law on Marital Duties). With the help of the tax, the British government tried to increase budget revenues during the exhausting wars with France, as well as increase the reproduction of the population. In 1706, the tax was abolished, as it did not produce results ^[20]. The childless tax was also levied in Bulgaria from 1909 to 1992. In Italy, Benito Mussolini introduced a tax on bachelors to increase the country's population to the figures of Germany and England. Historical experience has shown that in no case has the tax on "bachelors and childless" been able to fulfill its function of stimulating fertility ^[5].

2. The fairness of the tax

The tax on bachelors and childless citizens has a complex moral and ethical character, which is also noted in foreign literature ^{[2, 3]}. The name of the tax is perceived as a kind of punishment by the state for those citizens who did not start a family or did not give birth to a child. However, the reasons for the absence of a family and children can be very different, including medical indicators. The question immediately arises about the fairness of this tax. The answer that lies on the surface will be unequivocal. The overwhelming majority of citizens will answer negatively. The tax is unfair, as it "punishes" and discriminates against such categories of persons as bachelors, unmarried, and citizens without children ^[8].

The scientific answer to the question of the fairness of the "bachelor and childless tax" is much deeper. The principle of fair taxation (according to A. Smith) consists in universality and solvency. The level of a taxpayer's solvency is determined by the level of his income. Not only the volume, but also the structure of human consumption depends on the income level ^{[6, 11, 21]}. People who do not have children and people who have children in their care are in economically unequal conditions. For example, two taxpayers have the same amount of income, and it doesn't matter if the income is 50,000 rubles per month or 300,000 rubles. The first taxpayer does not have children, he spends all his income (50,000 or 300,000 rubles) exclusively on his own consumption. The second taxpayer has, say, three children. He spends his income not only on himself, but also on the maintenance of his three children. Raising children in modern society involves spending not only money, but also the time and moral strength of parents. This leads to the fact that citizens with children have a reduced potential opportunity to increase the income of the family as a whole. For example, instead of investing money (opening a bank deposit, investing in the securities market, paying for education in order to get a new profession, advanced training courses), parents opt for long-term investments in children's education (paying for additional classes in a foreign language, music or art school, sports section, club, etc.). Moreover, when answering the question about the fairness of the childlessness tax, one should always remember that the birth and upbringing of children is the most important condition not only for economic development, but also for the existence of society itself ^{[1, 4]}. In the second half of 2024, the President of the Russian Federation again raised the issue of the importance of increasing the birth rate in the country. In this context, the question of the fairness of the childlessness tax takes on a different aspect.

The use of taxes to solve the tasks of the state's social policy is based on the economic essence of taxes ^{[14, 15]}. Taxes, acting as the main method of mobilizing state budget revenues, represent a relationship of redistribution of the gross domestic product created in the national economy between business entities and the state. A taxpayer who does not have expenses for the maintenance and upbringing of children may pay a slightly larger part of his income as a tax than the taxpayer who participates in the process of population reproduction ^[16]. This is the economic justice of the childlessness tax. Economic justice will be enhanced provided that the proceeds of this tax are strictly targeted for the implementation of state social policy measures to increase the birth rate and support families with children, including the implementation of national projects "Demography" and "Family". However, it is necessary to immediately determine that the tax should receive a new name. The name of the tax has a very great moral significance. The former name (the tax on bachelors, single and small-family citizens) or the name "childlessness tax" is absolutely excluded. The tax, through its name, should not be perceived by the population as a punishment or as an instrument of discrimination. The very name of the tax should emphasize the fairness of its collection. We can suggest the following name for this tax: "A special tax to finance state support measures for families with children." Such a tax name will emphasize its fairness and social significance.

It should also be noted the importance of conducting preliminary explanatory work before the introduction of this tax. The Federal Tax Service of Russia, together with the media, will have to provide extensive work to clarify the essence and purpose of this tax.

3. Development of key tax parameters

When introducing a special tax to finance state support measures for families with children, its key parameters should be determined: tax status (federal, regional, or local) and the budget for enrollment; tax payers; tax base; tax rate; tax period and calculation procedure; tax benefits.

Tax status. By analogy with personal income tax, a special tax on financing state support measures for families with children should have the status of a federal tax, with transfer to regional budgets. The status of a federal tax will ensure the equality of constitutional rights of all citizens of the country.

Tax payers. Individuals who are tax residents of the Russian Federation and individuals who are not tax residents of the Russian Federation (in terms of income received from sources in the Russian Federation) between the ages of 25 and 45 who do not have children should be recognized as payers. The proposed age criterion for taxpayers is based on the following indicators. The average age at which women become mothers in the Russian Federation has increased to 26 years. Since 2007, the number of women who gave birth at the age of 40+ has grown annually by an average of 8% (Rossiyskaya Gazeta, Women over 40 have set a new birth rate record in Russia, electronic link - URL: https://rg.ru/2022/07/12/zhenshchiny-40-ustanovili-novyj-rekord-rozhdaemosti-v-rossii.html (date of access: 04/16/2024)). The tax base. It is advisable to establish the tax base as the taxpayer's income received from one of the employers of the taxpayer's choice. This approach to determining the tax base is due to two reasons: reducing the cost of tax administration; preventing a sharp increase in the tax burden of individuals with an increase in labor and entrepreneurial activity of individuals.

The tax rate. The fairness of each specific tax largely depends on the size and form of the tax rate. Proposals to establish a fixed amount of tax found in the speeches of public figures (for example, the previously mentioned proposal by T. Butskaya to introduce a tax on childlessness in the amount of 500 rubles) are unacceptable from the point of view of observing the principle of fair taxation. The equal method of taxation (a fixed amount of tax) is recognized by science as the most unfair. It is impractical to set the tax rate at a fixed percentage of the income received, for example, 6% of the income actually received.The establishment of a proportional rate in any amount in relation to the proposed tax will also not comply with the principle of fair taxation, since not all income earned by an individual spends on the maintenance of children. The establishment of the ad valorem rate will lead to the fact that people who do not have children will, in fact, pay personal income tax at a higher rate. In order for the proposed tax to act as a fair additional tool for redistributing income between taxpayers with dependent children and taxpayers without children, the tax rate must be linked to the minimum subsistence level per child and the average salary.

The method of constructing the tax rate is based on the fact that the rate should be a part of the share of the subsistence minimum per child in the average salary. At the federal level, it is possible to set the maximum tax rate at the level of 1/4 of the share of the subsistence minimum per child in the amount of the average salary. In 2023, the cost of living for children in Russia as a whole amounted to 13,944 rubles (Federal Law No. 466-FZ of December 5, 2022 "On the Federal Budget for 2023 and for the planning period of 2024 and 2025"). The average salary in the Russian Federation in 2023 was fixed at 73709 rubles ("Average monthly salary in the Russian Federation as a whole" (Material prepared by ConsultantPlus specialists according to Rosstat) electronic link - URL: https://www.consultant.ru/document/cons_doc_LAW_326052 / (date of access : 03/19/2024)). Thus, the maximum tax rate will be 4.7%.

According to a survey by the Public Opinion Foundation, a quarter (25%) of Russian adults do not have children (Vedomosti, "FOM: a quarter of Russian adults do not have a single child" electronic link - URL: https://www.vedomosti.ru/society/news/2023/08/18/990910-chetvert-vzroslih-rossiyan-ni-rebenka (date of access: 04/16/2024)). Thus, if we extrapolate this figure to the number of employed Russian citizens in 2023 (73532.7 thousand people (Federal State Statistics Service, Labor Resources, Employment and Unemployment, electronic link - URL: https://rosstat.gov.ru/labour_force (date of application: 04/16/2024))), the potential number of taxpayers of this tax will be 18,383.2 thousand people. Using the averaging method (using the average salary), the tax base for the tax will amount to 1,355 billion rubles, and the maximum amount of tax revenues to the budget will be 63.7 billion rubles.

In conditions of differentiation of the average wage and the minimum subsistence level by region, it is advisable to grant the subjects of the federation the right to set a reduction coefficient to the maximum tax rate of at least 0.7 (by analogy with the current procedure for personal income tax on income from the sale of property).

The tax period. It is advisable to recognize a calendar year as a tax period. The tax must be calculated and transferred to the budget by the tax agent on a monthly basis, in the same manner as for personal income tax. Assigning the duty to calculate taxes to a tax agent will prevent large-scale tax evasion. The tax administration of this tax is quite simple. The presence of the Registry Office information resource at the Federal Tax Service of Russia will make it easy to verify the absence of children from those persons who do not pay this tax, bypassing tax legislation.

Tax benefits. At the federal level, it is proposed to exempt the following categories of taxpayers from paying taxes: Heroes of the Russian Federation; members of the Free Military Forces; conscripted and contract military personnel; disabled people of groups I and II, as well as those with disabilities from childhood; full-time students. As a benefit, we also propose to establish the right for women who have given birth to receive a refund from the budget of the amount of tax paid earlier during pregnancy. The subjects of the federation should be given the right to introduce additional regional benefits.

Conclusions

The conducted scientific research allowed us to come to the following main conclusions:

1. Historical experience has shown the ineffectiveness of the indirect impact of the state on increasing the birth rate through the introduction of taxes on bachelors and childless citizens.

2. The introduction of a special tax to finance state support measures for families with children will comply with the principle of fair taxation. The proposed mechanism of this tax will become an additional tool for redistributing income between categories of citizens with and without children. The fairness of the new tax will also be achieved by using it to finance government measures to support families with children. Thus, the introduction of the proposed tax will also work to solve the problem of increasing the birth rate in the country.

3. A new special tax for financing state support measures for families with children should have the status of a federal tax with 100% of its revenues credited to the budget of the subject of the federation.

4. When introducing a tax, identify individuals aged 25 to 45 years who do not have children as taxpayers; link the amount of the tax rate to the proportion of the child's subsistence level in the average salary; provide for tax exemption for certain categories of taxpayers.