Fertility without taxes: Matvienko proposes to exempt families with many children from paying personal income tax

The demographic situation in the country remains difficult. Speaker of the Federation Council Valentina Matvienko proposed exempting large families from paying income tax (NDFL). She also said that we need to think about introducing support measures for grandparents who are involved in raising and caring for their grandchildren. The initiatives are aimed at supporting the birth rate in the country. Experts told MK how the abolition of personal income tax for families with many children can affect the filling of budgets and what social consequences this will lead to.

“As for large families: also think about it – exemption from income tax. A family that has many children – what is the income tax? They work, they work. There are such incentive measures, maybe targeted ones, but they are very important for families of this kind,” Matvienko said during recent parliamentary hearings.

Let us recall that personal income tax (NDFL) is a traditional tax levied throughout the historical development of the domestic economy. Currently, the personal income tax rate in Russia is 13% for citizens whose income does not exceed 5 million rubles. Well, the richest citizens pay a tax rate of 15%. The income of non-resident individuals is taxed at a rate of 30%. It is revenues from personal income taxes that occupy the largest share in the structure of federal budget revenues.

As a rule, families with three or more children are considered large, but there are differences in age criteria across regions. Meanwhile, according to data as of January 1, 2023, the number of large families in Russia increased from 1 million 250 thousand to 1 million 566 thousand. This is 25% more than the figures for the last All-Russian Census of 2010. At the same time, according to Rosstat, in January-August 2023 the number of births decreased by 2.6% compared to the same period last year and amounted to 850.2 thousand people, and at the end of the whole year the department expects a decline in the birth rate by 4.6 %.

Will exemption from personal income tax be able to stimulate the birth rate and how will this affect the budget? “MK” addressed this question to experts – economists, specialists in the social sphere.

Ivan Samoilenko, managing partner of B&C Agency:

“This is not the first time that a proposal to exempt any category of the population from paying personal income tax has been made. This is one of the real measures that could help reduce the burden on the poorest segments of the population and increase their income level. Previously, such an initiative was offered for low-income citizens whose income was at or slightly higher than the minimum wage.

Obviously, such a proposal will be relevant for large families, because maintaining and raising even one child is already a large financial burden, not to mention a larger number of children. But it is difficult to say whether this measure will be adopted, because similar initiatives have not been introduced before.

As for the budget, you need to understand: personal income tax is the most important tax in the country, which provides the maximum amount of revenue in the budget structure. It is difficult to calculate how much the state treasury will lose from this initiative (since we are talking only about large families). But since the initiative is being promoted by such an authoritative politician as Valentina Matvienko, perhaps it will still be accepted, and then this will become a measure of support not only for the well-being of citizens, but also for positive changes in the demographic situation in Russia.”

Andrey Loboda, director of communications at BitRiver:

“Such an initiative is extremely positive and has every chance of finding a response at the legislative level. Exempting large families from personal income tax can become an incentive to increase the birth rate. Economic benefits for families can increase their well-being and confidence in the future, which can encourage more children in the family.

Such measures will reduce the financial burden on large families, providing them with additional funds for daily needs, education and medical expenses. Thus, it will improve the economic stability of families and their standard of living. It is obvious that exemption from personal income tax can reduce the level of poverty directly among children themselves.

But an increase in the number of children in families can contribute to the sustainability of the pension system in the long term, since the new generation will contribute to social funds.

Also, do not forget that increasing incomes among large families can stimulate consumption and investment in education, which ultimately will contribute to the economic growth of the country.

At the same time, it must be taken into account that exemption from personal income tax should be part of a comprehensive strategy to support families, including the full preservation of all the benefits that were in effect for them.”