Many countries have played with the childless tax or a similar payment, however, such an idea has neither contributed to the increase in the number of children, nor allowed to significantly replenish the state treasury with money to be allocated to support large families
This is according to a BDO study. "Historically, governments have always been creative in terms of finding and generating income to fill the public purse," concludes Jānis Zelmenis, partner of JSC BDO Latvia. He reminds that the state treasury is empty not only for Latvia, but also for most governments of the world, because there are no funds to finance the services and infrastructure needed by society, except perhaps for defense. Since the population is aging in Europe and not only here, there are relatively few children, so in order to ensure the stability of the pension system, as well as the workforce, ideas about some special solutions, including the childlessness tax, are nothing new. Apart from the lack of money, the other problem is the demographic crisis, so the question is how we will try to get out of it, by punishing the absence of children, or like other countries, we will support families with children much more than at present and also with immigration. "I can only recommend that the entire new Latvian Cabinet of Ministers deal more with stimulating family support and promoting prosperity and wealth, rather than throwing around ideas about the childless tax," said J. Zelmenis.
Demographic pitfalls
BDO researcher Marijama Sultanova concludes that the birth crisis has been fought for centuries and the tax system has been used as a solution, especially targeting bachelors and childless families, starting from ancient Rome and ending with occasional outbreaks in the newly formed EU. However, the idea of a childless tax has not really caught on. There have been various reasons for this. It is interesting that calls for the introduction of the childless tax can be observed almost or all over the world, as politicians in Great Britain, Russia, China and Germany express them. Britain, once threatened with a demographic crisis by an aging population, entered into talks on a childless tax after Oxford professor Paul Moreland urged policymakers to make changes. Opponents pointed out that it was impractical to tax many groups of biologically childless people - the infertile, adoptive or foster parents, and an endless list of exceptions - which, if not taken into account, would anger the moderately famous Universal Declaration of Human Rights. The frequency of these debates in today's political arena makes it necessary to urgently delve into the origins and implementation of the childless tax and its followers.
German attempt
As an interesting and curious example, Jānis Zelmenis, partner of JSC BDO Latvia, mentions the German long-term pension insurance plan, which was created in 1995 to provide care for elderly and chronically ill people. Respectively, its costs are covered by the current generation of workers (just like in Latvia), which in turn benefits from the contributions of future workers, etc. Germany's Constitutional Court ruled in 2001 that workers with children would pay lower contributions. The justices argued that the law was unconstitutional, citing an unfair financial advantage to childless individuals who do not help support future contributors but nonetheless benefit in the future from the premiums contributed by future generations of workers. Since 2005, childless persons over the age of 23 had to pay a premium, which increased over the years and reached 0.35 contribution rate points in addition to the fixed rate of 3.05%. In 2012, a group of German conservative MPs submitted a detailed proposal to then-Chancellor Angela Merkel and Minister of the Interior Hans Peter Friedrichs, demanding the introduction of a childless tax.
The Youth Group led by Marco Vanderwitz proposed that childless German citizens over the age of 25 would pay part of their income as a special tax, those with one child would pay half the tax rate, and families with more than one child would be exempt tax. The money would go not only to social insurance, but also to infrastructure and education. Both Merkel and Friedrich rejected this generous offer, with the only representative who did not veto it being the Bavarian Minister of Family Affairs, arguing: "A person who builds a future and has children should not be burdened with the same contributions as someone who does not do so for reasons.” The SPD, Germany's largest party in the federal parliament, scoffed at the proposal for a socially healthier alternative – to provide better care for families, rather than punishing the childless choice, explains J. Zelmenis.
US lesson
Although the U.S. federal government never passed formal childless tax laws, during colonial times in Georgia, Montana, Maryland, and Texas, the childless were financially persecuted. The most traditional justification for the tax was the argument that bachelors had more wealth at their disposal because the income was not spent on supporting the family. After the colonial times, the narrative changed, and the main reason became population size – in the 1930s, the birth rate was one of the lowest in the country. American legislators saw bachelors and widowers who refused to remarry as a marginal, unhealthy category prone to crime and vice. However, these laws did not get enough support, and the main reason was gender discrimination - they wanted to tax only men, and this caused a wave of indignation, writes the BDO researcher.
Italy's attempt
Fascist Italy also tried to solve the demographic problem with childless taxes. In addition, the country did not have particular difficulties with birth at that time, but the duchess believed that this was not enough. Italy needed workers and soldiers, so bachelors were considered extremely irresponsible individuals. Mussolini himself gave an impassioned speech in which he claimed that the initiative would add 40-50 million lire to the state coffers a year, a prediction that turned out to be wrong after trial and error. But most of all, the Duce emphasized the responsibility of each person before the nation: “What do 40 million Italians mean compared to 90 million Germans and 200 million Slavs? What are 40 million Italians compared to 40 million French plus 90 million of their colonies, or 46 million English plus 450 million people living in their colonies?” This tax consisted of a fixed and a variable part: the fixed contribution started from 70 lira for persons aged 25 to 35 and increased to 100 lira for persons aged 50 and over. The amounts were changed with increases in 1934 and 1937, and with the fall of the Mussolini regime, the tax was abolished entirely. However, since then the Italian parliament has engaged in delicate attempts to restore it, the last time in 1999 by the mayor of Vastogirardi.
Nazi Germany also implemented a similar policy and introduced Ehestandshilfe - a tax on singles - whose function was primarily to strengthen Adolf Hitler's most privileged race. Similarly, in South Africa, the Transvaal had a tax in place between 1917 and 1920, which was intended to suppress the growing black population and balance the proportion of the white population.
Professional refusers
In some cases, policymakers, with a sudden change in opinion, began to worry about those who were unlucky with Cupid's arrow. For example, one of the questions that plagued government leaders was what would happen to bachelors who tried hard to find love but couldn't win over the ladies? In Argentina, legislation decided to create a rule for those who could prove that they had been rejected when they asked a woman to marry them, and were thus exempt from the bachelor tax. This created a niche market - one of many innovative forms of tax evasion - for professional refusers who agreed under oath to convince the authorities that they had refused a marriage proposal in exchange for money.
The one-child policy has been scrapped
Another idiosyncratic example is China, whose 35-year one-child policy, which notoriously skewed the population, in 2016 allowed couples to have two children to balance the population. When this did not give results, in 2021 the number of children allowed was increased to 3 children. The Sisyphean task of increasing the birth rate resulted in two innovative ideas proposed by specialists – a national birth fund and a special tax for DINK (Dual Income, No Kids) families. This time, too, these policies were scorned for their restrictive nature – the one-child rule, which forced women to have abortions, now replaced by a childless tax, seemed socially repulsive, writes a BDO researcher.
Restoring what was lost in the war
The most infamous tax, in effect from 1941 to 1992, was introduced during the rise of the USSR. Reasons – the need to drastically increase the population due to the huge war losses, to motivate Soviet families to give birth to children, to create an additional source of income that would help reduce the costs of the war, and to maintain orphans in orphanages, the number of which grew alarmingly. Demographic and social differences were determined by several conditions - according to the law, childless men aged 25 to 50 and childless married women aged 20 to 45 had to pay 6% of their income to the state. Heroes of the Soviet Union, soldiers awarded three degrees of the Order of Glory, persons unable to reproduce due to health conditions, and students were exempt from the fee. Modeled on the USSR, similar laws were passed in communist Romania and Poland, and ranged from 6 to 10% of income; they were abolished only with the collapse of the USSR bloc.
Causes migration to cities
Taxes in the Ottoman Empire had eclectic roots, some created during the state's existence, others inherited from the Arabs, such as the tax on non-Muslims, and finally some carried over from the Byzantine Empire, the latest example being the bachelor tax. The resm-i mücerred tax, adopted in the XV century, forced childless and unmarried peasants to pay a large sum to the state treasury. The tax was so severe that with its introduction, the rural poor rushed to the cities, where there was no longer any authority over them. The empire's metropolises, especially Istanbul, began to grow rapidly at the expense of such unfortunates, leading some historians to wonder if this was the original idea. Later the tax was reduced and childless farmers paid almost the same tax as married and large families.
Without children - therefore without inheritance
The origins of the ironic tax can be traced back to ancient Rome, when unmarried people tried to pursue celibacy. The so-called Lex Papia et Poppaea was introduced in AD 9 and imposed numerous penalties on the unmarried and childless, who not only had to pay the state, but more importantly, were deprived of their inheritance rights. A one-year vacatio period was granted to widows from the day of their husband's death, and to divorced women - a period of six months from the moment of divorce, during which they were not subject to the prescribed penalties. They also applied to widows. Sanctions applied to men who were celibate all their lives or who married after the age of 60, as well as to women who married only after the age of 50. Whether they later had children didn't matter, as their categories defaulted to childless.
Better bonuses
Although it may seem antiquated, the childlessness tax and measures like it are a relic of a time when a country's sovereign power depended largely on population. However, some see them as stealthily entrenched in modern politics and returning to fund care and pensions for an aging population.
Various countries, including Australia, Canada, Lithuania and Singapore, offer a child allowance in addition to tax benefits, Hungary permanently exempted women from income tax in 2019 (Latvia has a personal income tax-free minimum for each dependent child of 250 euros per month or 50 euros in the wallet) with four or more children; some may argue that it can be implicitly assumed that a childlessness tax already exists in these countries, since families without children cannot take advantage of the relevant tax breaks. The BDO researcher concludes that the lines to be drawn by legislators can sometimes seem unclear, but when in doubt, it is important for policymakers to remember that the list of consequences is quite broad, perhaps unlimited. Instead of devoting a lot of time and resources to discussing it, governments should be addressing the painful problems of dysfunctional childcare systems, skyrocketing house prices and low wages, rather than waging a moral war in already financially devastated societies.
There is no shortage of funny taxes
"What are people unable to think of and what taxes have not been introduced in different countries - for sugar, salt, brothels, sandwiches, eyes, etc.," J. Zelmenis points to the publication in Dienas Biznesa on 18.09.2009. J. Zelmenis mentions the tax on eyes, which was introduced in Bashkiria (Russia) in the 18th century, as the most stupid tax, which is no longer valid, - owners of gray eyes paid 8 altins (3 kopecks), and owners of black eyes only 2-3 altins .
On the other hand, in Austria, not only non-alcoholic drinks, but also kefir and yogurt were subject to excise duty. In Antwerp, the tax for a room in a brothel is 2,480 euros per year. A special cat tax has also been noticed - in one of the Dutch villages it is 42 euros per year. "If there has already been a beard tax in Russia, a sandwich tax in America, a cat tax in China, a watch tax and even an air tax, it seems, in Byzantium, there has also been a tax on foreigners in some countries, so even today's politicians can try to revive one of the taxes already tried in history, ” says J. Zelmenis with irony.
There were fun ideas in Latvia as well
"Latvia has also had all sorts of fun ideas, in which the childless tax is considered more of a relic of the past," says J. Zelmenis.
He remembers that at one time in Latvia, the idea of applying an income tax of 0.5% to the net value of a person's assets - property, gold, valuables, works of art, etc. - was quietly discussed. So that a person who has property worth 100,000 euros (a private house) but has obligations – a mortgage loan – in the amount of 150,000 euros, would not have to pay such a tax on the value of wealth, then it was proposed to subtract debts from the value of the property. In 2017, in the context of tax reform, the Saeima's responsible committee discussed the issue of introducing a tax on luxury goods.
The proposal to introduce luxury goods tax in Latvia has been re-submitted by Saeima member Andrejs Klementjevs. The offer also included the procedure for taxation - as a percentage of the value of the product. Namely, this tax would be 15% for a luxury product with a value of up to 1,000 euros, 10% for a product whose value exceeds 1,000 euros and is up to 50,000 euros, and 5% for a value above 50,000 euros. In turn, the Cabinet of Ministers should determine the types and categories of luxury goods. The discussion ended in a fiasco, because the proposed solution would not only be difficult to administer, but would probably cost more to administer than the revenue from it. It is interesting that in Soviet times, when the prices of goods were determined administratively, they already included a relevant luxury tax. For example, the selling prices of passenger cars were set in thousands of rubles, although their production and delivery costs were many times lower. "There was something similar with televisions, tape recorders and sectional furniture. In today's language, it could be called a peculiar tax on wealth or luxury goods in the form of VAT or excise tax," recalls J. Zelmenis.
Historically, the introduction of the childless tax has always ended with its logical cancellation, at the same time, such a solution has neither significantly promoted the birth rate, nor generated significant additional income in the state purse, which would allow providing significant support to families with many children, Jānis Zelmenis, partner of JSC BDO Latvia.
Co Author: Maryam Sultanova
Source: Dienas Bizness