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Fiscal impacts of taxation on pension in aging Korea : A generational accounting approach

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  • Fiscal impacts of taxation on pension in aging Korea
  • Chun, Young Jun
  • University of Washington


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Title Fiscal impacts of taxation on pension in aging Korea
Similar Titles
Sub Title

A generational accounting approach

Material Type Reports
Author(English)

Chun, Young Jun

Publisher

[Seattle, U.S.]:University of Washington

Date 2006-05
Pages 31
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Social Development < Employment
Holding University of Washington

Abstract

This paper investigates the fiscal impacts of taxation on pension in aging Korea. We approach this issue considering the special feature of Korean pension taxation structure, the EE-half T system with: (1) the provision of too generous tax incentive to pension that allows the deduction for the pension benefits as well as for the pension contributions; and (2) tax exemption for the revenue from pension funds. We found that the tax exemption for the pension fund revenue will substantially deteriorate the long-term fiscal balance, through the crowding-out of taxable nonpension wealth by the tax exempt pension wealth and its resulting annuitization of wealth, while the provision of the deductions for the pension benefits as well as contributions has only small impacts, because of low effective marginal tax rates for the wage income and the large magnitude of public pension benefit promised compared with the pension contributions.