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

  • Salvador Barrios
  • Flavia Coda Moscarola
  • Francesco Figari
  • Luca GandulliaEmail author


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.


Tax expenditures EUROMOD Simulations Pensions 

JEL Classification

H5 H23 H24 



Funding was provided by Joint Programming Initiative More Years, Better Lives (Grant No. CIRCLE). The results presented here are based on EUROMOD version H0.34. EUROMOD is developed by ISER at the University of Essex, in collaboration with national teams from the EU member states. We are indebted to Holly Sutherland and the many people who have contributed to the development of EUROMOD. The process of updating EUROMOD is supported by the European Union Programme for Employment and Social Innovation ‘Easi’ (2014–2020). We use microdata from the EU Statistics on Incomes and Living Conditions (EU-SILC) made available by NSIs and Eurostat under Contract EUSILC 2011/55 and (for the UK) the Family Resources Survey data made available by the Department of Work and Pensions via the UK Data Archive. We are grateful to M. Belloni, A. Jousten, S. Riscado, A. Brender, M. Cioffi, M. Savegnano and participants at the presentations at the University of Antwerp (March 2017), IMA Conference (June 2017), CEF Ljubljana (April 2018), Banca d’Italia (March 2018), JRC Fiscal Policy analysis seminars (June 2018), CeRP Workshop (July 2019) for helpful comments. F. Coda Moscarola, F. Figari and L. Gandullia acknowledge the support of CeRP Collegio Carlo Alberto through the JPI MYBL (Project “Care and Income Redistributive Cycles in the Lives of the Europeans”). The findings, interpretations and conclusions expressed in this paper are entirely those of the authors. They should not be attributed to the European Commission. Any mistakes are the authors’ only.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.European CommissionJoint Research CentreSevilleSpain
  2. 2.CeRP Collegio Carlo AlbertoTurinItaly
  3. 3.Department of EconomicsUniversity of InsubriaVareseItaly
  4. 4.ISERUniversity of EssexColchesterUK
  5. 5.Dondena University BocconiMilanItaly
  6. 6.Department of Political ScienceUniversity of GenoaGenoaItaly

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