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Tax Treatment of Private Pension Savings in OECD Countries and the Net Tax Cost Per Unit of Contribution to Tax-Favoured Schemes

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  • Kwang-Yeol Yoo
  • Alain de Serres

Abstract

This paper provides, for all OECD countries, an estimate of the net tax cost per currency unit of contribution to a tax-favoured retirement savings plan, using a present-value methodology. The latter takes into account the future flows of revenues foregone on accrued income and of revenues collected on benefit withdrawals corresponding to a unit contribution made in a given year. The net tax cost is first calculated for nine (five-year) age groups, which have different relative income levels and investment time horizons, and is then averaged across age groups. In order to take into consideration the relevant country-specific features of savings taxation, the paper also provides an overview of the tax treatment of private pension arrangements and alternative savings vehicles. The results indicate that the size of tax subsidy varies significantly across countries, ranging from nearly 40 cents per unit of contribution (Czech Republic) to around zero (Mexico, New Zealand). Over half of ... Traitement fiscal des pensions privées dans les pays de l'OCDE et le coût fiscal net par unité de contribution à un plan d'épargne retraite Cette étude présente pour l’ensemble des pays de l’OCDE, une estimation du coût fiscal net (e.g. dollar ou euro) de contribution à un plan d’épargne retraite à traitement fiscal favorable, à partir d’une méthode de valeur présente. Cette dernière prend en compte les pertes futures de recettes fiscales découlant de la nontaxation des revenus d’intérêt ainsi que des recettes encaissées au moment de la perception des bénéfices par les détenteurs du plan de retraite. Le coût fiscal net est calculé pour neuf groupe d’âge (de cinq ans chacun), disposant de niveaux de revenus et d’horizons d’investissement différents. Le coût par groupe d’âge est ensuite aggrégé pour obtenir un coût moyen pour l’ensemble de la population. Les résultats indiquent que la valeur de l’incitatif fiscal varie de façon significative à travers les pays, passant de 40 cents par unité de contribution (République Tchèque) à près de zéro (Mexique, Nouvelle-Zélande). Plus de la moitié de pays de l’OCDE encourt ...

Suggested Citation

  • Kwang-Yeol Yoo & Alain de Serres, 2004. "Tax Treatment of Private Pension Savings in OECD Countries and the Net Tax Cost Per Unit of Contribution to Tax-Favoured Schemes," OECD Economics Department Working Papers 406, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:406-en
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    File URL: http://dx.doi.org/10.1787/387535760801
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    Cited by:

    1. Immacolata Marino & Filippo Pericoli & Luigi Ventura, 2011. "Tax Incentives and Household Investment in Complementary Pension Insurance: Some Recent Evidence From the Italian Experience," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 14(2), pages 247-263, September.
    2. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2010. "The Effect of Saving Subsidies on Household Saving – Evidence from Germanys," Ruhr Economic Papers 170, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Willmore, Larry, 2007. "Universal Pensions for Developing Countries," World Development, Elsevier, vol. 35(1), pages 24-51, January.
    4. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2008. "Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households," Economics Working Papers 2008-18, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications, The World Bank, number 7336.
    6. Axel Börsch-Supan, 2004. "Mind the Gap: The Effectiveness of Incentives to boost Retirement Saving in Europe," MEA discussion paper series 04052, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    7. Frédéric Gonand, 2006. "Réforme des retraites, marchés financiers et investissement socialement responsable : les affinités électives," Revue d'Économie Financière, Programme National Persée, vol. 85(4), pages 285-294.
    8. Pierre-Carl Michaud & Frederic Vermeulen, 2006. "A Collective Labor Supply Model Identification and Estimation in the Presence of Externalities By Means of Panel Data," Working Papers 406, RAND Corporation.
    9. repec:wbk:wbpubs:6007 is not listed on IDEAS
    10. Caminada, Koen & Goudswaard, Kees, 2005. "Budgetary costs of tax facilities for pension savings: an empirical analysis," MPRA Paper 20735, University Library of Munich, Germany.
    11. George Kudrna & Alan D. Woodland, 2015. "Progressive Tax Changes to Superannuation in a Lifecycle Framework," CESifo Working Paper Series 5645, CESifo Group Munich.
    12. World Bank, 2014. "Poland : Saving for Growth and Prosperous Aging," World Bank Other Operational Studies 20441, The World Bank.
    13. Fang Cai & John Giles & Philip O'Keefe & Dewen Wang, 2012. "The Elderly and Old Age Support in Rural China : Challenges and Prospects," World Bank Publications, The World Bank, number 2249.
    14. Isabelle Joumard & Mauro Pisu & Debbie Bloch, 2012. "Tackling income inequality: The role of taxes and transfers," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 37-70.
    15. Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 3. Income Redistribution via Taxes and Transfers Across OECD Countries," OECD Economics Department Working Papers 926, OECD Publishing.
    16. Martin, John P. & Whitehouse, Edward, 2008. "Reforming Retirement-Income Systems: Lessons from the Recent Experiences of OECD Countries," IZA Discussion Papers 3521, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    comprehensive income tax; coût fiscal net; dépense fiscale; expenditure tax; impôt sur le revenu; net tax cost; pensions privées; private pensions; revenue foregone method;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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