Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300368 
Year of Publication: 
2023
Series/Report no.: 
EUROMOD Working Paper No. EM 04/23
Publisher: 
University of Essex, Institute for Social and Economic Research (ISER), Colchester
Abstract: 
Living standards in old age are affected both by the pension system and the tax system. Yet, little research analyses the interaction between both systems. In this paper, we connect the principles of the pension system (solidarity vs. insurance) to the principles of the tax system (vertical equity vs. horizontal equity), and analyse to what extent they are in line with each other for 28 European countries. We find that horizontal equity is not relatively more important in insurance-based countries, nor is vertical equity relatively more important in solidarity-based countries. Countries that deviate from horizontal equity are able to do so without taxing pensioners into poverty. In contrast, where the tax system deviates from horizontal equity in favour of workers, this comes at the cost of taxing relatively larger shares of pensioners into poverty. Our results highlight the interlinkages of both systems and the importance of studying them together.
Subjects: 
tax-benefit system
pension system
old age poverty
pension taxation
equity principles
JEL: 
D04
D31
H22
I38
I32
Document Type: 
Working Paper

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