Size and distributional pattern of pension-related tax expenditures in European countries

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 allEUMember States usingEUROMOD,theEU-wide microsimulationmodel. Adopting a benchmark system inwhich 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.

BARRIOS Salvador;  MOSCAROLA Flavia Coda;  FIGARI Francesco;  GANDULLIA Luca; 

2020-09-09

SPRINGER

JRC118532

0927-5940 (online),   

https://link.springer.com/article/10.1007/s10797-019-09580-7,    https://publications.jrc.ec.europa.eu/repository/handle/JRC118532,   

10.1007/s10797-019-09580-7 (online),