The standard personal income tax deduction for children allows you to reduce the income tax payable, which is withheld monthly from your salary by the employer and transferred to the Federal Tax Service. This is a benefit that all citizens can count on if they have children of a suitable age - up to 18 years old or up to 24 years old in the case of full-time education.

What is needed in order for an employee to receive a benefit and for the employer to provide it correctly:

1. The employee needs to write an application for deduction and collect necessary document, submit the entire package to the employer. The set of documents depends on the status of the recipient, the number of children, and their health.
2. The latter must know the current amount of personal income tax deduction for children, for example, in 2017 it is 1400 or 3000 depending on the order of birth (plus additional deductions for disabled children of 6000 or 12000).
3. The employer must know the salary limit up to which the deduction is allowed. This limit may change. In 2017 size limit value is 350,000 rubles.
4. The employer must correctly calculate income tax taking into account the deduction and the existing income limit.

Conditions for receiving the standard deduction for children

First condition— recipient status:

To receive a child deduction, the citizen applying for it must have one of the following statuses:

• parent (adopted or natural);
• guardian;
• adoptive parent;
• trustee;
• the new husband or wife of the specified persons.

Second condition- children's age

You can count on receiving a standard personal income tax benefit if the age of the children fits the existing restrictions:

1. no more than 18 years of age (the right to deduction is lost at the end of the year in which you turn 18);
2. no more than 24 years old if the child is a full-time student (the right to the benefit is lost at the end of the month of graduation).

Third condition- amount of income

Even if the two above conditions are met, the child deduction is not provided all the time, but only until the citizen’s total annual income does not exceed the limit established at the legislative level.

In 2017 standard deduction for children until the total salary since the beginning of the year is reached in the amount of 350,000 rubles. Starting from the month in which total income reached 350,000 rubles. the provision of personal income tax benefits is terminated.

That is, income accrued from January to the current month is considered. Up to 350,000 rub. the deduction is subtracted from the salary when calculating income tax, starting the month after 350,000 rubles. benefit accounting stops until the end of the current calendar year. From the beginning of next year, the right to a standard tax benefit again appears if the above conditions are met.

Fourth condition— availability of all necessary documents

The employer will not take into account the benefit if the employee simply comes and says that there are children. Documentary justification is required.

Documents are submitted once to one employer. There is no need to duplicate them annually.

You need to re-confirm your right to a standard personal income tax deduction if:

• there are changes in the number of children - as a result of birth or death;
• the child acquires a documented disability;
• the right to double deduction or such right is lost;
• The application for deduction indicates the year for which the benefit must be provided.

Fifth condition— availability of taxable income

If there is no income on which personal income tax is withheld at 13%, then there is no right to a standard income tax benefit.

Amount of personal income tax deduction for a child in 2017

The size of the standard tax benefit in connection with the presence of children in the family is determined in paragraph 4 of paragraph 1 of Article 218 of the Tax Code of the Russian Federation.

In 2017, the following deduction amounts were established:

Amount of deduction, rub.	When provided
	The minimum amount can be claimed by parents who have one or two children (a deduction in the specified amount is provided for each), that is, if there are two minors, then the total amount of the benefit is 2800 rubles.
	Oversized, you can count on it large families where there are more than two children. At the same time, the first two are entitled to 1,400 rubles, the third and subsequent ones - 3,000 rubles. When calculating the number of children, you need to count all existing children, including those for whom the personal income tax deduction is no longer provided. Dead children must also be counted.
	An increased amount for a disabled child can be received by guardians, trustees, adoptive parents (the deduction is summed up with the above
	Increased amount for a disabled child for natural parents or adoptive parents (the deduction is also summed up with the standard

Example:

The Potapov family has three children: the eldest is 25 years old, the middle one is 12, and the youngest is 5. The middle son has a disability. Total amount of standard deduction = 0 + (12000 + 1400) + 3000 = 16400 rub.

Who is entitled to a double deduction for children and what is its size?

A double children's standard deduction for personal income tax can be obtained if one of the conditions is met:

• the recipient of the benefit is the only one for the child - (the second parent has died, is declared dead or missing by the court, is not recorded in the birth certificate or is recorded according to the mother, the latter can be confirmed by a certificate from the registry office);
• the second parent refused the benefit entitled to him in favor of the first.

Both cases must be supported by documents.

What documents are needed to apply for a child’s personal income tax deduction?

Scroll main documents from an employee:

1. Application to free form with a request to provide a deduction for children (you should not indicate the year in which the employer needs to provide the deduction, otherwise the application will have to be rewritten the next year);
2. Copies of birth certificates for each child in the family (including adults, their availability will affect the amount of the benefit). Copies are attached to the application. If necessary, originals must be presented.

Scroll additional documents(required depending on the situation):

• confirmation of the status of the recipient of the standard personal income tax deduction, if this is not the natural parent of the child (court decision on adoption, act appointing a guardian or trustee);
• marriage certificate - provided by the new spouses of the parent (may be required additional documents confirming that the new husband or wife is involved in maintaining the child - papers indicating payment of alimony, cohabitation with the child);
• a document confirming the status of a single parent - required to obtain a double deduction (birth certificate with a dash in the father column, a certificate from the registry office, a death certificate of the second parent, a court decision declaring the second parent dead or missing);
• statement from the other parent about refusal to receive tax deduction for personal income tax and 2-personal income tax - needed if one of the parents plans to receive a double deduction due to this (for themselves and their spouse). The application can be prepared once, and a certificate of income must be received at the second parent’s place of work on a monthly basis; it will confirm that the deduction is indeed not taken into account for his income when calculating personal income tax;
• certificate of disability of the child - to receive an additional standard deduction (if it has an expiration date, then after its expiration you need to get a new one);
• documents on full-time education - for students aged 18 to 24 years;
• 2-NDFL - certificate of income from previous place of work - needed if a citizen gets a job in this year not from its beginning;

All documents, except statements and 2-NDFL, can be provided in the form of copies.

Questions and answers on the topic - personal income tax deduction for children

Answer: If the marriage is registered and both spouses participate in the maintenance of all children, then the children of both spouses are considered common. All are taken into account when determining the amount of the standard personal income tax benefit. If the marriage is not registered, the children are counted separately.

Question 2: From what month does the personal income tax deduction begin?

Answer: Starting from the month in which the child was born (he was adopted, accepted into the family).

The current employer begins providing a deduction from the month of hiring if an employee with children is hired.

Question 3: When does the standard child benefit end?

Answer: Until the end of the year in which the child turns 18 years old, or the agreement on adoption or acceptance into the family is terminated. That is, if your eighteenth birthday falls on March 3, 2017, you must continue to provide the deduction until the end of 2017. For students aged 18-24, benefits cease to be taken into account after graduation. For example, if you complete your studies in June 2017, the deduction is no longer available from July 2017.

For the current employer, the benefit is taken into account based on the month of dismissal.

Question 4: Can I get the standard child deduction if I have no income?

Answer: If in some months there is no income with a 13% deduction, then no deduction is provided for these months. However, if in the current year a citizen continues to work and receive income, then he has the right to a deduction not only for the months of income, but also for those months when there was no taxable income.

If, from a certain month until the end of the year, the receipt of income subject to personal income tax completely stops, then the deduction for these months is not provided and is not carried over to the next year.

Question 5: Should an employer provide a deduction to an employee if he is on parental leave?

Answer: No, you shouldn't. Because monthly allowance, received by an employee for a child, is not taxed income tax 13%.

Question 6: What to do if an employee filed documents for child benefits late (for example, not in the month when the baby was born, but later)?

For previous years, personal income tax can only be returned through the Federal Tax Service.

Personal income tax benefits are provided for certain types of payments to employees, a complete closed list of which is given in Art. 215, 217 Tax Code of the Russian Federation. Let's take a closer look at these benefits and the procedure for their application.

Tax benefits for personal income tax

Exemption of certain employee income from personal income tax accrual is recognized as a benefit for this tax. Income for which it is established tax benefits Personal income tax are given in Art. 215, 217 Tax Code of the Russian Federation. These include:

• Alimony.
• One-time material aid for a born (adopted) child, paid during the first year after the relevant event (birth or adoption).
• Compensation for travel costs.
• Payment from net profit employer medical services for employees, their spouses, parents and children (including adopted children, wards before reaching adulthood), as well as employees who retired due to old age or disability.
• Amounts from the sale of shares in the authorized capital Russian company, if they were continuously owned by one person for 5 years individual and were acquired later than 01/01/2011 (part 7 of article 5 of the law “On Amendments to Part Two Tax Code RF" dated December 28, 2010 No. 395-FZ). When selling shares acquired earlier on 01/01/2011, the provisions of Art. 214.1 Tax Code of the Russian Federation.
• Payments to reimburse the costs of paying interest on loans and borrowings for the construction or purchase of housing. In this case, these payments must be taken into account as part of the income tax expenses of the enterprise.
• Payments by international organizations to their employees in accordance with the organization’s charter.
• Other payments to employees specified in Art. 215, 217 Tax Code of the Russian Federation.

Read more about tax-exempt income in the article “Income not subject to personal income tax (2018-2019)” .

To apply the provisions of Art. 217 of the Tax Code of the Russian Federation, it does not matter the position held by the employee (letters of the Ministry of Finance of Russia dated October 25, 2013 No. 03-04-06/45128, dated April 9, 2013 No. 03-04-05/6-360) and whether he is a resident of Russia ( letter of the Ministry of Finance of Russia dated June 18, 2010 No. 03-04-06/6-125).

Example

Voskhod LLC decided to pay financial assistance to all employees in the amount of 7,000 rubles. to each. The benefit for the payment of financial assistance provides for exemption from taxation Personal income tax amounts at 4,000 rubles. for each employee. However, the employer is obliged to withhold personal income tax from the amount exceeding threshold value- 3,000 rub. Therefore, the amount of actual payment of financial assistance to one employee will be:

7,000 - 4,000 × 13% = 6,610 rubles.

Personal income tax benefits for children

One-time financial assistance for a born child, paid during the first year after the relevant event, implies similar conditions for adoptive parents and guardians (clause 7.1 of Article 217 of the Tax Code of the Russian Federation). For the latter, the one-year period is counted from the date of adoption (establishment of guardianship).

Financial assistance can be received at the place of work by either one or both parents (letters from the Ministry of Finance of Russia dated December 26, 2012 No. 03-04-06/6-367, Federal Tax Service of Russia dated April 2, 2013 No. ED-17-3/36@) .

This benefit assumes that financial assistance in the amount of 50,000.00 rubles. should not be taxed. If both parents receive financial assistance from their employers, the benefit will be RUB 50,000.00. for the parents' total income.

As confirmation of receipt of the amount and its size, it is permissible to use a certificate of form 2-NDFL (letter of the Ministry of Finance of Russia dated July 1, 2013 No. 03-04-06/24978, dated December 7, 2012 No. 03-04-06/8-346).

Personal income tax benefit when paying severance pay in connection with dismissal (including dismissal by agreement of the parties and in connection with retirement)

Tax benefits for personal income tax are established in relation to next payments to an employee upon dismissal (paragraph 1, 6, 8, paragraph 3, article 217 of the Tax Code of the Russian Federation):

• severance pay;
• average earnings for the period of employment;
• compensation in the amount of no more than 3 times (for residents of the Far North - 6 times) average earnings paid upon dismissal to the manager, chief accountant or deputy manager (letter of the Federal Tax Service of Russia dated May 22, 2017 No. BS-4-11/9568@).

The last restriction applies to each employee (letter of the Ministry of Finance of Russia dated February 16, 2017 No. 03-04-06/8715) and echoes the one introduced in 2014 in the Labor Code of the Russian Federation (Law “On Amendments ..." dated April 2, 2014 No. 56-FZ ) new article 349.3. This article limited the amount of possible payments upon dismissal for managers to the specified limits (3- and 6-fold) government organizations or companies with a dominant state share:

• companies in which more than 50% of shares (shares in the authorized capital) are formed by state or municipal property:
• managers;
• deputy managers;
• chief accountants;
• members of collegial bodies of state corporations, state-owned companies or enterprises that have entered into employment contracts;
• off-budget funds, unitary enterprises:
• managers;
• deputy managers;
• chief accountants.

Employment contracts that contradict the norm of Art. 349.3 of the Labor Code of the Russian Federation, will be executed only within the limits established by this article (Article 2 of Law dated 04/02/2014 No. 56-FZ). At the same time, the restriction does not affect other legally provided payments to these persons in the form of:

• salaries, including average earnings paid for certain periods;
• payment for unused vacation;
• payment of expenses subject to mandatory compensation;
• payment for the period of employment.

Read about calculating non-taxable income upon dismissal in the material “How to calculate the non-taxable limit upon dismissal” .

The same law of the Russian Federation dated April 2, 2014 No. 56-FZ established a legislative ban on the use of personal income tax benefits in cases of dismissal due to:

• disciplinary action;
• committing guilty actions (inactions) regulated by the Labor Code of the Russian Federation or other legal acts.

Often, the employer guarantees the payment of severance pay in cases not provided for by law (for example, in connection with retirement or dismissal by agreement of the parties). However, it is not worth not taxing payments that are not established at the legislative level. The court took an unambiguous position on this issue, despite the fact that the explanations of the Ministry of Finance and the Federal Tax Service allowed this to be done.

Read more about court decision regarding the taxation of payments upon dismissal by agreement of the parties - in the article “It has become dangerous not to impose personal income tax on severance pay by agreement of the parties” .

Results

In some cases, the income of individuals is not subject to personal income tax. A complete list of such situations is given in Art. 215 (for foreigners) and 217 (for Russians) of the Tax Code of the Russian Federation. Most of the income not subject to personal income tax is of a social nature (state benefits, financial assistance, alimony, etc.)

..will not allow the Baltics to overcome poverty and emigration

Latvian Economy Minister Arvil Asheradens said the government will defeat mass emigration from the country by increasing wages. However, the economy of Latvia and other Baltic countries is structured in such a way that salaries there will always be several times lower than in Western European countries. European integration has created peripheral capitalism in the Baltics, and this economic model makes it impossible to overcome poverty and emigration in Estonia, Latvia and Lithuania.

IN economic science There is a concept called the “middle income trap.” It refers to a situation where a country that has reached a certain level cannot “break through” this level and develop further. A stop in development gives rise to economic lag, which leads to the degradation of the country.

Third world countries often fall into the middle income trap. The colonial past of these countries determines their development in the logic of peripheral capitalism, when the former metropolis sucks resources (including human) from them, becomes for these countries the center of concentration of production, technology and capital, and leaves them with the fate of a sales market and a raw material appendage.

Wages in the countries of peripheral capitalism will never be on the same level as the countries of the economic Center, because if they reach this level, then business will go to countries with lower labor costs. The economies of such countries operate under the conditions of a continued gap in development from poorer countries, so that imports bring profit to producers, and a continued lag behind richer countries, so that consumers of these imports retain jobs. This situation is the “middle income trap.”

European integration has shaped just such an economic model in Estonia, Latvia and Lithuania, and now the development of peripheral capitalism in the colonial logic is driving the Baltics into the “middle income trap.”

In all three Baltic countries, officials and economists have been openly talking about this danger over the past two or three years.

“We must admit honestly and without illusions: Estonia has fallen into a “middle income trap”, aggravated by falling demographics and almost non-existent economic growth,” said a joint study by the auditing company KPMG and the Central Union of Employers of Estonia, published at the end of 2016.

“From a competitiveness point of view, the advantages of cheap prices still dominate in Latvia. work force. If the current situation continues, the rate of economic development in medium term will be able to reach only 2–3% per year, in which case the economy risks falling into the “middle income trap,” says the UN Latvia Report on the Introduction of Sustainable Development Goals, published by the Interdepartmental Coordination Center this spring.

“We find the European Commission’s proposal to reduce Lithuania’s cohesion policy funding by 24% unacceptable. We have always advocated rules for the distribution of funds that would provide for a gradual reduction of funds for regions that have reached 75% of the average GDP indicator in the EU per capita. A sudden reduction in funds increases the threat of further convergence of Lithuania and increases the likelihood of falling into the “middle income trap,” and this will only increase the rate of emigration,” Lithuanian Finance Minister Vilius Sapoka complained about the impending cuts in subsidies from European funds this summer.

Therefore, the initiative of the head of the Latvian Ministry of Economy to combat emigration by increasing salaries is pure pre-election populism.

With the existing economic model in the Baltic countries, salaries and living standards in general in peripheral Lithuania, Latvia and Estonia will always be several times lower than in the countries of the “core” region of the EU - Western Europe.

However, the “middle income trap” is not a death sentence for states that fall into it. Over the years, Finland and South Korea, Brazil and Singapore have been included and selected, moving to a new level of development. The recipes have long been known and described many times. It is necessary to increase production, stimulate domestic demand for domestic products and search for markets to increase exports, long term investment in science, education and infrastructure, the formation of an innovative economy with high added value, the production of unique products and high salaries for unique specialists.

In other words, to get out of the current situation, the Baltic states must solve the problems that they created for themselves.

In 1991, Lithuania, Latvia and Estonia were not predetermined to become colonies of Germany, Great Britain and other Western European countries. The Baltic countries had a developed high-tech industry with high added value. The share of industry in the Baltic states at the time of its secession from the USSR was higher than in Germany today - more than 60% of the economies of Lithuania, Latvia and Estonia.

In addition to industry, there was the most modern infrastructure built Soviet Union. There were guaranteed export supplies to traditional markets in the east. It was possible to simultaneously access Russian resources and German technologies. There was transit potential. There were world-class specialist training schools. There were unique scientific and production teams capable of creating an innovative product and forming a knowledge economy in the Baltics.

The Baltic states themselves abandoned all this: having all the necessary starting positions, Lithuania, Latvia and Estonia voluntarily chose development in the logic of peripheral capitalism.

The conscious efforts of the Baltic governments, which complemented the accession to the common European market and the severance of cooperative ties in the East, destroyed the bulk of local industry - the share of industrial production in the structure of the economy decreased to 10–15%.

Traditional sales markets that seemed unshakable were lost, and no new markets were found for Baltic exports. In the last few years, everyone had the opportunity to observe the phantasmagoria of the “war of sanctions,” when the governments of Lithuania, Latvia and Estonia first convinced that the Russian food embargo would not affect the meat and dairy industry, then tried to find buyers for local milk and kefir in China, the Dominican Republic and the Cayman Islands, then proudly declared that their countries were suffering the most from the sanctions policy in the EU, but did not change their attitude towards Russia, then asked the European Commission for compensation for their bankrupt milkmen.

The Baltic countries missed the opportunity to be a “bridge” between East and West and make money from it economically, instead beginning to play the function of a wedge driven between Germany and Russia. They are losing their transit potential literally before our eyes: the decline in cargo turnover continues for the fifth year railways and Baltic ports.

Finally, the most important resource - human - has also almost completely slipped through our fingers.

Higher technical education was dealt a mortal blow immediately after independence by its translation into state languages. Unique scientific and production teams were dispersed, their research institutes and design bureaus were closed. Science has been destroyed. World-class professors, engineers, inventors in Latvia and Estonia were stripped of their citizenship and moved to where their brains are more valuable. Young talented Lithuanians, Latvians and Estonians today are leaving Lithuania, Latvia and Estonia in droves immediately upon reaching adulthood.

In this state of affairs, what innovation economy, what kind of increase in production and exports and what sales markets are we talking about?

The Baltic countries have condemned themselves to the position of the backwaters of Europe: the “middle income trap”, peripheral capitalism and steady degradation.

Over the past few years, they have been gradually depriving themselves of the remaining levers to reach a new level: Agriculture, transit. Their only chance is flying to London with low-cost airlines full of guest workers. It is impossible to stop this process, because emigrants are fleeing poverty, and Baltic poverty is not a misunderstanding, not a temporary nuisance or a mistake, but an integral part of the Baltic “success story” formula.

Alexander Nosovich

Since its former leader Deng Xiaoping began to implement economic reforms China has experienced fairly unprecedented levels of economic growth. In 1982 it lost 2.2% world GDP, and by 2012 - 14.6%: no other country has increased by more than 30 years over the past century and a half than China. And yet, having gone from being a low-income country to a middle-income country, China now faces similar headwinds to many other middle-income countries as China's economic growth slows to its slowest pace in more than a quarter century.

Recent slowdown

For about 30 years, the Chinese economy grew at an average rate of 10% per year, or three times the global average. This unprecedented wave of growth helped lift more than 600 million Chinese out of poverty, raised real GDP per capita from about 5% of US levels in 1980 to about 20% in 2011, and transformed China from a low-income to a middle-income country.

However, as China now tries to make the next transition to high-income status, it is showing signs of trouble. Growth averaged 8% between 2011 and 2014, and with recent shocks stock market and the biggest single-year devaluation of the yuan in 20 years, China appears to be slowing even faster than expected, with some economists predicting its growth this year will be just 4%, far lower than the official target of 7%.

While weaker growth is a relatively new phenomenon for China, it is a common experience for other countries that have rapidly moved from low-income and low-income status. This is such a common trend that it has become known as the “middle income trap.” (In details: How do emerging markets avoid the middle income trap?)

Income trap

An article published by the Levy Institute of Economics in 2012 indicated that as of 2010, 35 of the 52 middle-income countries were considered stuck in the middle-income trap, with the majority located in Latin America(13 countries) and the Middle East and North Africa (11). There were also six in sub-Saharan Africa, three in Asia and two in Europe.

Essentially, the middle-income trap characterizes economies that, after achieving middle-income status, are largely due to the fact that those factors that contributed to the country's rapid growth begin to evaporate as income levels rise.

Low wage initially attracts global investment in labor-intensive goods such as textiles, which in turn provides many jobs for the newly established industrializing nation. However, as poverty is reduced, the reasons why a country's industries are considered competitive soon begin to be addressed. Wages begin to rise, and investment subsequently begins to shift to lower-cost countries.

At the middle income level, a country's competitiveness should be driven by productivity growth that uses resources more efficiently. Otherwise, the nation may be stuck between a rock and a tight spot: its costs are now too high to compete with low-income countries, but its productivity cannot compete with the economies of high-income countries.

Is China stuck in a trap?

With a gross national income (GNI) of US$7,380 in 2014, China is within the range of The World Bank defines as upper middle income status. Combined with the recent economic downturn in China, this makes the country a potential candidate for a middle-income trap. But these are not the only factors.

China has seen rapid wage growth, worker activism and periodic labor shortages put increasing pressure on industry costs that some multinational corporations producing labor-intensive products in China have begun to look for lower-cost alternatives in other countries. China's industries are beginning to lose competitiveness in low-income countries whose average wages are lower and whose labor pools are plentiful.

And they are also losing the battle to compete in high-income countries that produce better, more complex products. Some Chinese consumers have reached income levels to allow them to buy products over high level, but they often perceive Chinese car brands, for example, as inferior to foreign brands, even those that were actually made in China. Therefore, if China wants to achieve high-income status, it will need to stimulate more industries and technologies that consumers will compare in quality and prestige with high-income countries. (See also China's economy: transition to sustainable growth).

The Bottom Line

China is finding that its growing wealth is creating a number of problems. No longer able to compete with low-cost, labor-intensive industries in other countries, especially as it wants to preserve rising citizens' incomes for fuel consumption, China needs to focus on enacting further reforms that will allow for more efficient use of resources and promote innovation in entrepreneurial activity. This will help China compete with industries in high-income countries and should lead to the creation of higher-paying jobs. If China can do this successfully, it will avoid falling into the middle income trap.

I was thinking about learning about the “middle income trap.” This is such a famous concept that says that countries that have reached a conditional “average income” begin to grow at a slower pace than before. This concept is popular in roundtables and columns, and a few years ago someone even pushed it into a speech by Prime Minister Medvedev (although Russian problems growth have little to do with the traditional concerns of example countries of this trap). The scientific literature on the “middle income trap” is also growing. However, this “trap” is one of those that I would like to understand whether it actually exists or not.

The main picture illustrating the “middle income trap” can be interpreted in both directions - both for and against the existence of the trap.

On the one hand, there are countries - like Brazil - that have been in the “middle group” for fifty years. Russia is essentially in the same place. But this “development at an average pace” is not universal. There are countries that, over the same 50 years, have moved from the middle group to the “rich” group - from South Korea to Spain (and if we had taken another period, 1948-2000, say, then Italy would have been included). Compared to them, Brazil and Russia are “trapped.” On the other hand, in growth rates different countries there is a great dispersion and some countries are growing quickly, some slowly (in addition to general patterns such as a slowdown in growth as the capital-to-labor ratio increases). Lant Pritchett and Larry Summers made a very powerful case in 2014 that this is exactly what we are seeing. (On the intellectual background - remember the explanation proposed by Evgeniy Slutsky to explain “Kondratiev waves” - a famous phenomenon for which empirical confirmation was never obtained?)

Eric, as it turned out, was not going to talk about this - the patterns he was talking about - about the fact that much more is known about how growth moves depending on the distance to the “technological front” and what institutions are needed at different stages of development. A good place to start reading is Aguillon-Acemoglu-Zilibotti, and Aguillon and Blundell have a whole series of articles on this, including firm-level and industry-level data. I described this many times in columns, both in and before - my own, my first column, confusing and verbose, was just about this cycle of works by Aguillon - then at the very beginning of the cycle. The works that I describe there existed only as preprints, but have now become building material standard textbooks on economic growth. In this formulation - how countries move to innovative growth if, as a result of catching-up development, they seriously reduce the distance to the most developed, rich countries - the question becomes more meaningful. On the other hand, for many countries - including ours - the practical problem is how to grow at a pace that would allow them to at least keep up with the development leaders - and this is definitely Not"middle income trap"