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Size and distributional pattern of pension-related tax expenditures in European countries

Salvador Barrios (), Flavia Coda Moscarola, Francesco Figari and Luca Gandullia ()
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Flavia Coda Moscarola: CeRP Collegio Carlo Alberto
Francesco Figari: CeRP Collegio Carlo Alberto

International Tax and Public Finance, 2020, vol. 27, issue 5, No 9, 1287-1320

Abstract: Abstract This paper quantifies the fiscal and distributional impact of tax expenditures related to public and private contributory pension schemes, affecting both contributions and pension benefits, in all EU Member States using EUROMOD, the EU-wide microsimulation model. Adopting a benchmark system in which pension contributions are exempt and taxes apply when benefits are received (EET system), we find that pension-related tax expenditures can have a sizeable impact on revenue and strong effects on inequality and poverty. Tax expenditures tend to be progressive on two levels: first, among pensioners, by favoring those with lower incomes, mainly as a result of the preferential treatment given to pension incomes; and, second, among people of working age, through a partial or no deduction of pension contributions, draining resources from those at the top of the income distribution. Moreover, embracing a lifetime perspective, tax expenditures tend to redistribute resources in favor of women and low-educated individuals.

Keywords: Tax expenditures; EUROMOD; Simulations; Pensions (search for similar items in EconPapers)
JEL-codes: H23 H24 H5 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Size and distributional pattern of pension-related tax expenditures in European countries (2018) Downloads
Working Paper: Size and distributional pattern of pension-related tax expenditures in European countries (2018) Downloads
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DOI: 10.1007/s10797-019-09580-7

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