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Voluntary pension savings: the effects of the Finnish tax reform on savers' behaviour

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  • Harju, Jarkko

Abstract

Many countries tax voluntary pension savings using the so-called EET model, based on tax-deductible savings and taxable withdrawals. In Finland the tax reform of 2005 changed the tax rate schedule from progressive to proportional, while the basic structure of the EET model was retained. This paper is an empirical study of changes in savers' behaviour as a result of the reform using individual level data. The econometric estimations indicate that the reform altered pension saving behaviour by reducing the labour income and age effects on saving contributions in a statistically significant way. Also, the reform reduced the number of pension savers among high income-earners.

Suggested Citation

  • Harju, Jarkko, 2009. "Voluntary pension savings: the effects of the Finnish tax reform on savers' behaviour," Working Papers 7, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:7
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    File URL: https://www.doria.fi/handle/10024/148746
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    Cited by:

    1. Ossi Korkeamäki & Tomi Kyyrä, 2012. "Institutional rules, labour demand and retirement through disability programme participation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 439-468, January.
    2. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    3. Korkeamäki, Ossi, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, VATT Institute for Economic Research.

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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