The Taxation of Internationally Portable Pensions: Fiscal Issues and Policy Options

26 Pages Posted: 18 Feb 2016

See all articles by Bernd Genser

Bernd Genser

University of Konstanz - Faculty of Economics and Statistics; CESifo (Center for Economic Studies and Ifo Institute)

Robert Holzmann

University of Malaya; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); World Bank

Date Written: January 18, 2016

Abstract

Pension policy reforms across the world in recent decades are a reaction to the changing demographic and socioeconomic environment. While pension scheme redesign has received much attention, the tax treatment of contributions, returns, and benefits of retirement savings remains mostly unattended and the taxation of internationally portable pensions is terra incognita for economists. This paper focuses on the huge differences in old-age pension taxation within and across OECD countries and highlights fiscal equity and efficiency issues that emerge in a world of internationally mobile workers and pensioners. It highlights that pension taxation differs widely not only across countries but also across pension pillars within a country, creating savings and mobility distortions and fiscal equity problems at individual and country level. The paper offers explanations for this heterogeneity and proposes a switch from deferred taxation towards front-loaded taxation of retirement savings to meet the demographic challenges of a globalized world. Three policy options presented differ in the way taxes are paid, but all of them are claimed superior to single-country measures taken to uphold deferred pension taxation or to rely on renegotiations of bilateral double taxation treaties.

Keywords: income tax reform, taxation of pensions, deferred income taxation, double taxation treaties

JEL Classification: H200, H240, H550

Suggested Citation

Genser, Bernd and Holzmann, Robert, The Taxation of Internationally Portable Pensions: Fiscal Issues and Policy Options (January 18, 2016). CESifo Working Paper Series No. 5702, Available at SSRN: https://ssrn.com/abstract=2733987

Bernd Genser

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Robert Holzmann (Contact Author)

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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