Taxation and Pensions – An Overview of Interplay

The paper describes the factors influencing the interplay of pension and tax policies from a fiscal and welfare perspective, and identifies areas where both topics can materially impact one another. The paper also explores the arguments for coordination between income tax and pension policies in light of the distributional and behavioral synergies. The paper raises questions regarding tax policy’s effectiveness for materially influencing pension coverage, contribution compliance, and labor mobility. The authors argue for taxing pension similarly to all other incomes and for limiting tax treatment of mandatory pensions, and for initiating coordinated tax and pension reforms before electoral demographics render such reforms even more difficult than today.