Frontloaded Income Taxation of Old-Age Pensions: For Efficiency and Fairness in a World of International Labor Mobility

19 Pages Posted: 21 Feb 2019

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: 2018

Abstract

Strong evidence shows that the existing pattern of cross-border pension taxation in OECD countries and beyond is extremely diverse and inconsistent, generating a double fairness dilemma for individuals and countries alike. This paper argues that this dilemma cannot be solved within the current network of double-taxation treaties. Instead, it proposes a new approach for the taxation of old-age pensions in a world of high and increasing cross-border mobility of workers and pensioners. The paper demonstrates that a coordinated move to frontloaded pension taxation and exclusive source taxation would pave the way for an international pension tax order that eliminates the double fairness dilemma. An additional innovative element of frontloaded pension taxation is presented: the decoupling of individual tax assessment and tax payment, which may help curb political opposition against frontloaded pension taxation and smooth transitional effects after its introduction.

Keywords: pension taxation, international taxation, international migration, double taxation convention

JEL Classification: H240, H550, H870, F220

Suggested Citation

Genser, Bernd and Holzmann, Robert, Frontloaded Income Taxation of Old-Age Pensions: For Efficiency and Fairness in a World of International Labor Mobility (2018). CESifo Working Paper No. 7423, Available at SSRN: https://ssrn.com/abstract=3338777

Bernd Genser (Contact Author)

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

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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