Property tax deductions and fairness of personal income taxation
Importance Fair taxation and its full implementation are one of the crucial issues in personal taxation. Vertical fairness becomes feasible not only if the progressive tax treatment of personal income is adopted, but also an effective tax deduction system is in place. In 2018, the government ceased to discuss whether it is possible to shift from the flat tax treatment of personal income to the progressive one. Hence it is especially important to consider issues of improving the existing personal income tax deduction system so as to strengthen the social fairness and tackle the poverty.  Objectives We identify challenging issues in the personal income tax deduction mechanism and make suggestions on their elimination.  Methods The research employs conventional techniques of economic analysis, induction and deduction. Based on comparative methods, we determine vectors of improving personal income tax deduction in the case when the taxpayer acquires residential property.  Results Low income people may hardly apply for the property tax deduction when they acquire residential property. Combined with social security charges, tax deduction in the case of residential property acquisition causes the hidden regression under the proportionate personal income tax. The existing mechanism for residential property tax deduction fails to fulfill its social and stimulation function.  Conclusions and Relevance We conclude that it is reasonable to introduce multiplying coefficients depending on the amount of property tax deductions in the case of residential property acquisition as it may strengthen the fairness of taxation and encourage low income taxpayers to resolve the housing issue.