The first 1000 days for the next 100 years

The first 1000 days for the next 100 years

Author: Gabriel BIRIS, Managing Partner, BIRIS GORAN SPARL

WE  ALL  KNOW  THAT  WHEN  WE  ARE  BORN,     OUR     BRAIN     IS     LIKE     AN     UNWRITTEN  BOOK.  We  have  tens  of  billions of neurons, but the connections between   them   do   not   exist   from   the   beginning.   Synapses  begin  to  form  fast,  our  brain  creating  more  and  more  synapses  in  the  learning  process  which  continues,   for   some   of   us   more,   for   others   less,   throughout our lifetime, but not in a linear way. We now know  that  the  synapsis  formation  process  is  much  faster  in  the  first  part  of  our  life,  80%  of  the  synapses  being formed in the first 1000 days of life (3 years), and 90%  of  them  being  already  formed  at  the  age  of  5.  I  have to confess that I found out this information only 5 years   ago,   when   a   good   friend   of   mine,   Ioana   Grindean,   invited   me   to   a   conference   on   early   education organized by Step by Step (RO) and Ready Nation (US).

WOW!  80%  of  the  synapses  are  formed  in  first  1000 days of life, the foundation on which we further build  our  life  is  laid  in  the  first  3  years,  i.e.  before  kindergarten!  As  Masaro  Ibuka  wrote  since  1972,  the  engineering  genius  behind  Sony,  in  the  book  “Kindergarten   is   too   late”,   and   the   foundations   should be laid sooner in nurseries.

The    nursery    was    not    even    regarded    as    an    educational  institution  in  our  country,  not  to  speak  about  the  number  of  places  in  nurseries  that  fail  to  cover at least 5% of the required ones...

The need for a nursery system, as early education institutions,  is  clear  for  reasons  related  not  only  to  education.  They  are  truly  needed  to  stimulate  the  birth  rate,  the  lack  of  a  trustworthy  solution  for  children’s   care   and   education   being   one   of   the   reasons  why  young  families  –  in  particular  those  formed   of   young   professionals   –   unfortunately   postpone   their   decision   to   have   children.   For decades,  far  too  little  was  done,  but  things  start  to  change.

The Parliament amended Education Law to include nurseries  in  the  list  of  educational  establishments,  but much more needs to be done in terms of defining the standards and training teachers. Additionally, the Parliament    has    recently    adopted    a    law    (Law    239/2020) that we deem to be extremely important to  ensure  funding  in  this  highly  important  field:  tax  credit  for  nurseries  and  kindergartens  up  to  RON  1,500/month/child.

The model is already successfully used by Romania ever since 2004, when the tax credit was introduced for  sponsorships  from  companies  to  NGOs,  up  to  0.3% of the turnover (later 0.5%), but no more than 20% of the corporate income tax due by companies. This  has  allowed  funding  NGOs  in  several  social  protection   areas,   the   refurbishment   of   wards   in   public hospitals, and even allows the construction of the first new hospital after the Revolution.

Law 239/09.11.2020 allows employers to pay for the  nursery  and  kindergarten  of  their  employees’  children,  up  to  RON  1,500/month  and  to  deduct  such  amounts  from  the  taxes  due.  Unlike  the  tax  credit   for   sponsorships,   the   amounts   may   be   deducted  not  only  from  the  corporate  income  tax,  but  also  from  the  salary  tax,  VAT  or  excise  duties  due   by   the   employer.   Unfortunately,   Law   239   provides that, for the employee,  the amounts paid for  nursery  or  kindergarten  are  only  eliminated  from the calculation base for the salary tax, and not also for CAS or CASS, which is wrong since it fails to reflect the initial idea. Fortunately, the error is to be rectified  soon  based  on  another  law  amending  the  Tax Code that we hope to see approved, promulgated and  published  in  the  Official  Gazette  in  the  next  days.

Why  is  the  tax  credit  so  important  for  nurseries  and kindergartens?

Because  it  stimulates  the  development  of  early  education,  ensuring  a  certain  funding  instrument.  Practically, it creates creditworthy demand, based on which  I  am  sure  that  supply  will  not  take  long  to  appear. Besides, the amount of RON 1,500 is not the result of any calculation, but the average amount for which   places   were   offered   in   the   nurseries   in   Bucharest in 2018, when the draft law was initiated. Early education is essential to stimulate the child to learn basic things that now seem to be missing and to reduce functional illiteracy which impacts a huge percentage    (46%)    of    the    15-year    old    youth.    Practically,   early   education   is   the   foundation   to   create  human  capital  without  which  it  is  difficult  to  imagine the attraction of investments, the creation of well-paid jobs, prosperity.

Because  it  stimulates  employment,  and  only  the  employees  with  employment  agreement  will  benefit  from this facility. Additionally, it stimulates the return to  the  workplace  sooner  for  the  parent  who  benefits  from  the  2-year  leave  for  childcare.  For  many  young  parents, two years may be a long period in which their professional  career  is  put  on  hold.  We  can  definitely  discuss about discrimination between those working based   on   an   employment   agreement   and   those   carrying  out  independent  activities,  so  the  solution  will  likely  need  to  be  extended.  Nevertheless,  it  is  a  (first) major step which can be improved, step by step.

Because    it    stimulates    the    birth    rate.    The    development  of  nurseries  allows  young  families  to  have  more  children,  the  example  of  France  being  particularly revealing in this respect.

Because  it  can  stimulate  the  return  back  home  of  the  Romanians  who  went  to  work  abroad.  A  non-taxable  net  benefit  of  RON  1,500  (circa  EUR  300)  means  a  gross  salary  benefit  of  EUR  500/month,  making the salary packages in Romania comparable to those existing abroad.

Because new jobs are created, hopefully well-paid, that  would  attract  more  and  more  teachers  in  the  education system.

Because it is a true public – private partnership in which   companies   become   a   distribution   chain between   the   budget   and   the   providers   of   early   education services.

Because    it    relieves    the    state    from    making    investments into nurseries and kindergartens, and it may  easily  focus  to  invest  into  education  in  areas  where, at least for now, there are no investors to fund such services.

These  measures  may  reverse  the  negative  trend  existing  in  Romania  in  the  last  3  decades,  which  affects   the   birth   rate,   migration,   increase   in   the   functional illiteracy percentage.

The measure will also impact the way in which real estate  developments  (offices,  retail,  industrial  and  logistics)  are  designed,  areas  that  bring  together  large numbers of employees. I am sure that even the residential developers will have to adjust their offer.

Do  I  sound  too  optimistic?  Maybe,  but  Romania  needs good news, and this law is one of them.

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