The Validity of Personal Income Tax Deductions: Analyzing Expenses for Children’s Education in Private Schools in Moscow

Abstract

Tax incentives are commonly used to support various sectors and population, and this study delves into the realm of deductions for the personal income tax (known as NDFL in Russia). We explore differing perspectives on these deductions, considering them either as investments in human capital for future income growth or as a form of government-initiated financing for specific sectors. Focusing on deductions related to children’s education expenses in private schools, the research evaluates the effectiveness of budgetary investments in this sector. Using DEA analysis, the study assesses private schools based on factors like teacher-student ratios, classroom space per student, and access to computers and educational literature. The learning outcomes were measured by the number of high performers in the Unified State Exam and the number of 9th-grade graduates with certificates of distinction. The evaluation of learning outcomes reveals that many private schools in Moscow prioritize comfort over educational standards and the majority of them perform below the average levels in terms of effectiveness. The findings prompt questions about the feasibility of including private school expenses in personal income tax deductions. The proposed approach recommends tying eligibility for these deductions to the effectiveness of private schools, ensuring a more targeted and impactful use of tax benefits.