Why and how to pay child benefit?

Child benefit payments in Azerbaijan date back to the Soviet era. On September 7, 1992, President Abulfaz Elchibey issued a decree on the payment of a unified monthly benefit to every child in the Republic of Azerbaijan, which gained national independence after the collapse of the Soviet Union, from the month of birth until the age of 16 (for students who do not receive a scholarship, until the age of 18). According to the Decree[1] of the President of the Republic of Azerbaijan No. 174, the amount of child benefit paid from October 1992 was determined in proportion to the ratio of the average monthly salary per capita in the family to the minimum wage.

According to the Law[2] of the Republic of Azerbaijan on Social Benefits, which came into force on January 1, 2006, and defines the legal basis for the appointment and provision of social benefits in the Republic of Azerbaijan, payment of a unified monthly benefit to children was removed from the list of benefits established by Article 4 of this law. This law established benefits for children with disabilities under the age of 18 and low-income families with children under the age of 1, and a one-time benefit for the birth of a child. Since then, since 2006, children raised in low-income families have been deprived of social benefits.

With the addendums and amendments adopted in the referendum on March 18, 2009, Part II of Article 15 of the Constitution[3] of the Republic of Azerbaijan was added to the new version of the Constitution with the sentence “Azerbaijan creates conditions for the development of socially oriented economy on the basis of market relations”. This means that Azerbaijan is transitioning to a model of the social welfare state and that social protection measures will be further expanded. But this did not happen. However, Part I of Article 16 of the Constitution states that the Azerbaijani state cares about improving the welfare of the people and every citizen, his/her social protection and a decent standard of living. Finally, Part I of Article 38 states that everyone has the right to social security. This means that the Azerbaijani state has social obligations to citizens, including children.

In addition, the Republic of Azerbaijan became a party to the UN Convention on the Rights of the Child on July 21, 1992. Later, it joined the relevant protocols of the Convention.[4] With this Convention, the Azerbaijani government has an obligation to protect the rights of children.

However, since 2006, the Azerbaijani state has not made any progress in this direction. Officials attribute this to the lack of demographic problems in Azerbaijan, natural population growth, as well as the fact that low-income (1), large families are paid a unified monthly payment under other social protection programs (2) and that the budget cannot bear the financial burden.

First, although there is an increase in the overall population in Azerbaijan, there is a decrease in the number of children compared to 2001. Such that according to the State Statistical Committee[5] (SSC), as of January 1, 2020, the number of children aged 0-17 in Azerbaijan was 2,636,700 people. In 2001, the number of children of this age was 2,998,900. This means that the number of children in Azerbaijan has decreased by 236,200 over the past 20 years.

Second, 85% of children are not supported under the current social protection programs in Azerbaijan. Such that according to the SSC, as of January 1, 2020, the number of children receiving social benefits was 401,249. The average monthly amount per capita was 118.4 manats, which is 15.2 percent of children under 18. This means that up to 85% of children are excluded from social protection programs.

Third, the problem of the budget is not in the financial provision but in its efficient and transparent spending. Calculations show that it is possible to pay monthly benefits for children within the current budget. Such that at present, 401,249 children aged 0-17 are paid an average of 118.4 manats per month. This means that the new benefit must be paid to the remaining children. By linking these payments to the family's income, the number of children who will have to be paid benefits will again decrease. On the other hand, as a result of the transition to a unified monthly child benefit, savings will be made on other programs.

If we look at the international experience, we can see three different directions of child benefit payments.

• Child benefits are paid to all families and determined on a regressive or progressive scale according to the number of children in the family. For example, in countries where demographic growth is observed, the amount of child benefit decreases as the number of children increases. In some countries, there is no demographic growth, and in those families, as the number of children increases, the amount of child benefit increases. For example, in Germany, as the number of children increases, the amount of child benefit decreases. However, as the number of children in Britain and Canada increases, so does the amount of child benefit.
• In some countries, child benefits are linked to family income. Low-income families are paid more in the form of child benefits. The amount of child benefit is also inversely proportional to the family's income. When the family income is low, they increase the child benefit even more. Such an approach exists in European countries, especially in Italy. At the same time, in the United States, there is a link between family income and child care. When incomes are low, child care is high, and when incomes are high, child care is relatively low.
• In international practice, the third approach is tax breaks based on the number of children. Rather, it is a practice to take into account the number of children in the family when refunding part of the tax paid. This practice is used by both the United States and Canada, as well as Australia and the United Kingdom. I think this may be interesting both in terms of the legalization of tax payments and the return of part of the amount paid in taxes for children.

In my opinion, Azerbaijan can also refer to the second model when determining the monthly benefit for children. I think that the payment of monthly benefits for children depends on the income of the family and its provision and needs. In many countries, the amounts given to children aged 0-6, 6-10, 10-15 are different. That is, children aged 0-6 are paid less money. The relatively much, the average amount is paid for children aged 6-10, and children over the age of 10 are paid more.

In Azerbaijan, a unified monthly benefit for each child aged 0-17 can be regulated and paid depending on the family income. In this case, the amount of allowance can be determined by the difference between the family income and the minimum cost of living for each member. Statistical studies show that poverty in Azerbaijan is more common for families with children. According to the SSC, as of January 1, 2020, in accordance with the size of households, the total number of families with 1 child is 30.1 percent, 2 children - 40.3 percent, 3 children - 19.9 percent, 4 and more children - 9.7 percent. The number of large families in the country is declining faster. Such that according to the SSC, 1,222 children were born in the country as the 5^th and subsequent children of the family in 2014, their number decreased to 1,108 in 2015, to 1,019 in 2016, to 946 in 2017, and to 925 in 2018. Although there are a number of reasons for the decline in the number of children and large families, the most prominent ones are the increase in divorces, the increase in the age of marriage, the increase in family expenses, and especially the high cost of children in the family budget. This creates a serious basis for reconsidering the state care policy for children. I think that in this case, the leading line of state care should be the restoration of child benefits.

I suggest that the Republican Children's Fund should be established to regulate and finance a unified monthly benefit for children. The fund's financial sources should be diversified through allocations from the budget, the State Oil Fund, and companies. Payment of a unified monthly allowance for children through contributions from the Oil Fund to the Children's Fund can eliminate, albeit partially, the existing injustice in the distribution of oil revenues, of which three quarters has already been spent, between generations. The payment of child benefits can strengthen the relationship between the state and the family and increase the confidence of families in the government.

In conclusion, I would like to say that the payment of child benefits will also stimulate the growth of business activity in the post-pandemic economy and increase budget revenues. Such that depending on the number of children in the family, the payment of a unified monthly payment will lead to an increase in family spending, an increase in the purchasing power of the population, and thus a greater inflow of consumer taxes into the state budget. Thus, the state will return part of the funds paid in the name of child benefit to the budget.

Gubad Ibadoglu

[1] Decree of the President of the Republic of Azerbaijan No. 174 on strengthening the social protection of low-income families, September 7, 1992, http://www.e-qanun.az/framework/7713

[2] Law of the Republic of Azerbaijan No. 55-IIIQ on Social Benefits, February 7, 2006, http://www.e-qanun.az/framework/11508

[3] Constitution of the Republic of Azerbaijan, http://www.e-qanun.az/framework/897

[4] Respect for human rights begins with the treatment of children, http://www.anl.az/down/meqale/azerbaycan/2012/noyabr/278387.htm

[5] Children in Azerbaijan 2020, Statistical Yearbook, https://www.stat.gov.az/source/demoqraphy/au/