The companion paper on the effects of the pension system reforms in Italy tries to estimate the effect of such reforms on the accumulation of private wealth. This paper looks at a widely debated aspect of Italian fiscal policy: the role of tax incentives in voluntary pension schemes. The development of funded pension schemes, designed to accompany or replace the existing PAYG system, is on the agenda of most developed countries. In Italy, tax incentives are frequently advocated to encourage this reform. However, it is difficult to find sound theoretical and empirical support for the proposal of tax incentives from the point of view of efficiency or equity. For this reason, our description and analysis of the Italian case is preceded by a section listing the economic and equity reasons for providing tax incentives to pension saving schemes, together with a short survey of empirical evidence for the effectiveness of this instrument in the most important industrial countries. A second section then describes the evolution of voluntary pension schemes within the context of reform of the Italian pension system, including an evaluation of the tax incentives provided for by Italian law. One of the most important conclusions that emerge from our analysis is that, contrary to accepted opinion, tax incentives are only one, and not always the most correct, measure to be adopted by a policy designed to provide protection from the risks associated with old age. A final section draws some policy conclusions and provides an insight into the possible lessons that a country like Japan can learn from the Italian experience.
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Find related papers by JEL classification: H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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