Gerard Hughes () (Economic and Social Research Institute (ESRI))
Abstract
The pensions industry's argument that the favourable tax treatment of occupational pension funds amounts to tax deferment rather than tax exemption is evaluated using a net present value approach to estimate the cost of the tax foregone in taxing employee pension contributions on a consumption tax basis rather than an income tax basis. It is shown that the net present value estimate and the Revenue Commissioners cash flow estimate are in close agreement if tax rates for workers and pensioners are the same and that the Revenue Commissioners estimate is conservative if tax rates for pensioners are lower than for workers. A comparison is made of the trend in the cost of tax expenditure on occupational pensions since 1980 relative to the trend in the cost of direct expenditure on social welfare pensions and it is shown that the cost of tax expenditure has grown from around 10 per cent in 1980 to 66 per cent in 1997 and that the Exchequer support for the average participant in an occupational scheme has risen from one quarter to more than one-and-a-half times Exchequer expenditure for the average participant in the social insurance scheme. The assumption, therefore, that pensions can be provided at less cost to the Exchequer through private financial institutions is questionable given existing pension tax arrangements. The distribution of the tax incentives provided for members of occupational pension schemes is evaluated and it is shown that most of the benefits accrue to those at the top of the income distribution.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number
WP139.
Length: 21 pages Date of creation: Apr 2001 Date of revision: Handle: RePEc:esr:wpaper:wp139
Contact details of provider: Postal: Whitaker Square, Sir John Rogerson's Quay, Dublin 2 Phone: (353-1) 863 2000 Fax: (353-1) 863 2100 Email: Web page: http://www.esri.ie More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Sarah Burns).
Related research
Keywords:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: