Size and distributional pattern of pension-related tax expenditures in European countries
- PDF / 2,178,333 Bytes
- 34 Pages / 439.37 x 666.142 pts Page_size
- 17 Downloads / 147 Views
Size and distributional pattern of pension-related tax expenditures in European countries Salvador Barrios1 · Flavia Coda Moscarola2 · Francesco Figari2,3,4,5 · Luca Gandullia6
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract This paper quantifies the fiscal and distributional impact of tax expenditures related to public and private contributory pension schemes, affecting both contributions and pension benefits, in all EU Member States using EUROMOD, the EU-wide microsimulation model. Adopting a benchmark system in which pension contributions are exempt and taxes apply when benefits are received (EET system), we find that pension-related tax expenditures can have a sizeable impact on revenue and strong effects on inequality and poverty. Tax expenditures tend to be progressive on two levels: first, among pensioners, by favoring those with lower incomes, mainly as a result of the preferential treatment given to pension incomes; and, second, among people of working age, through a partial or no deduction of pension contributions, draining resources from those at the top of the income distribution. Moreover, embracing a lifetime perspective, tax expenditures tend to redistribute resources in favor of women and low-educated individuals. Keywords Tax expenditures · EUROMOD · Simulations · Pensions JEL Classification H5 · H23 · H24
B
Luca Gandullia [email protected]
1
European Commission, Joint Research Centre, Seville, Spain
2
CeRP Collegio Carlo Alberto, Turin, Italy
3
Department of Economics, University of Insubria, Varese, Italy
4
ISER, University of Essex, Colchester, UK
5
Dondena University Bocconi, Milan, Italy
6
Department of Political Science, University of Genoa, Genoa, Italy
123
S. Barrios et al.
1 Introduction Tax expenditures are usually defined as “exceptional tax treatments with respect to a generally agreed benchmark tax system” (Burton and Sadiq 2013). Such a generalization is deliberate because a specific feature of tax expenditures is that they can be “positive” in the sense that they represent a reduction in tax liability or “negative” in the sense that they increase the tax burden. Although recent EU legislative measures have recognized the relevance of accounting for and measuring the impact of tax expenditures, there is a notable difference in EU Member States’ practices, including their methods, details and timeliness (Kalyva et al. 2014), making a cross-country comparison of the size and redistributive effects of tax expenditures, based on nationally provided information, extremely complex, if not impossible. Notwithstanding the conceptual and measurement issues, there is general agreement that in many EU Member States tax expenditures constitute a non-negligible proportion of gross domestic product (GDP) (OECD 2003, 2010; Kalyva et al. 2014; Barrios et al. 2018; Avram 2018), as in the USA. (Toder 2000; Burman et al. 2008). In particular, it is widely recognized that pension systems are generally subject to favorable tax treatment (OECD 2015, 2
Data Loading...
