Revenue Effects of Tax Facilities for Pension Savings

Koen Caminada () and Kees Goudswaard

Atlantic Economic Journal, 2008, vol. 36, issue 2, 233-246

Abstract: Many countries have tax facilities for pension savings. These facilities are often associated with the application of the cash-flow treatment of pensions: pension contributions are tax-exempt, capital income of pension funds is tax-exempt, and pension benefits are taxed, but usually at a relatively low rate. This paper investigates the revenue effects of a cash-flow tax regime for pension savings by full present-value calculations. A comprehensive income tax system is used as a benchmark. We present an empirical analysis for the Netherlands as a typical example of a country with funded pensions. Our calculations show that current taxation of pensions implies a major tax revenue loss. For the year 2003, we estimate a fiscal pension subsidy of 1.4% to 1.5% of Gross Domestic Product (GDP). Copyright International Atlantic Economic Society 2008

Keywords: Pension saving; Tax treatment; Tax revenue loss; E62; H24; H55 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:36:y:2008:i:2:p:233-246

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DOI: 10.1007/s11293-008-9114-1

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