Summary:Tax incentives are the main driving force and key factor for the development of the personal pension system, and whether its orientation is preferential or inclusive directly affects the participation rate of the personal pension system.
Text: Yang Changhan
Tax incentives are the main driving force and key factor for the development of the personal pension system, and its orientation is preferential or inclusive, which directly affects the participation rate of the personal pension system, and then affects whether the personal pension system can play an important role in improving the multi-level and multi-pillar pension insurance system and actively responding to the challenges of aging.
At present, the preferential tax policies are obvious, which is not conducive to improving the participation rate of the personal pension system and restricting the personal pension system to play its due function and role. Taking into account the policy objectives of tax expenditure capacity, tax fairness and efficiency, and incentive for the personal pension system, it is necessary and can build inclusive personal pension preferential tax policies to promote the inclusive development of personal pensions.
The current policy has good tax incentives for high-income groups with a small population base, and not only does not have tax incentives for low- and middle-income groups with a large population base and is more in urgent need of supplemental old-age security, but instead produces negative tax incentives.
The announcement on the individual income tax policies related to personal pensions (Announcement No. 34 of 2022 of the Ministry of Finance and the State Administration of Taxation) stipulates that the individual pension tax shall be included in the pre-tax deduction according to the maximum limit of 12,000 yuan per person per year in the payment stage, and no tax shall be paid in the investment stage, and the individual income tax shall be paid at a fixed rate of 3% in the receiving stage.
At present, the threshold of individual income tax is 5,000 yuan per person per month, and a number of special deductions have been added. After the tax threshold and a number of deductions, individuals are subject to a seven-level progressive income tax system of 3%-45% according to their income grades, and the number of individual income tax payers is less than 50 million, and the average annual tax saving per capita is 360 yuan to 54,000 yuan for individual pensions.
The payment within the personal pension limit is included in the special deduction before income tax, so the preferential tax policy of the payment limit only has the effect of reducing the tax burden and delaying the payment of tax for less than 50 million individual income tax taxpayers, and the personal pension system only has an incentive effect for a small number of people who exceed the individual income tax threshold. In the absence of capital gains tax, individuals who invest in personal pensions with tax-free or low-tax income are taxed at 3%, and the tax burden does not decrease but increases, resulting in the exclusion of the majority of low- and middle-income groups from the personal pension system.
The preferential tax policy for personal pensions is not conducive to the increase in the participation rate of the personal pension system.
**The Opinions of the General Office on Promoting the Development of Personal Pensions (Guo Ban Fa 2022 No. 7) clearly states that "workers who participate in the basic old-age insurance for urban employees or the basic old-age insurance for urban and rural residents in China can participate in the personal pension system." "By the end of 2022, more than 10 people in China had participated in the basic pension insurance for urban workers and urban and rural residents500 million people, tax incentives should be for the whole system licensed 10500 million people.
In fact, from the beginning of the implementation of the personal pension system in 2022 to the end of June 2023, the number of individual pension accounts opened in the country is only 40.3 million, less than 4% of the population permitted by the system (the number of contributors is less than one-third of the number of account openings, only slightly more than 1% of the population permitted by the system), and the per capita payment is only more than 2,000 yuan, far lower than the annual payment limit of 12,000 yuan permitted by the system.
The preferential tax policy for personal pensions restricts the personal pension system from playing its due function and role.
At present, China's total population exceeds 1.4 billion people, and it is facing severe challenges of aging. As of 2022, the number of people over 65 years old in the country reached 2100 million people, more than 2 people over 60 years old800 million people, the old-age dependency ratio has increased from 8% in 1982 to 21 in 20228%, the average life expectancy of the population increased from 67 in 198177 years old has increased to 77 in 2020He was 93 years old. According to a report by the National People's Congress, the number of elderly people in China will increase to 4 by 2050At the peak of 8.7 billion people, the proportion of the elderly population will reach 348％。
In the face of such a large existing and rapidly expanding elderly group, and the era cycle of aging before getting rich, the basic pension insurance of the pay-as-you-go system is bound to be unsustainable. The preferential tax policy limits the personal pension system to a limited population, which will make the system unable to play its due role in realizing the function of supplementary pension insurance, improving the multi-level and multi-pillar pension insurance system, and actively responding to the challenges of population aging.
1. Optimize the tax policy, and the model can adopt the EET, EEE, and TEE models in parallel.
At present, China's personal pension adopts a single EET tax preferential model, which is not conducive to improving the participation rate of the personal pension system, limiting the function of preferential tax policies and limiting the effect of preferential tax policies. According to the policy combination design of tax (tax) and tax exemption (exempt) at different stages of payment, investment and treatment, the internationally accepted personal pension tax models mainly include EET, TEE, EEE and other models.
At present, China's EET model incentivizes high-income groups with a very limited population, which has a relatively strong ability to self-support for the elderly, and the tax incentive effect is reflected as the "icing on the cake". The number of low- and middle-income groups is larger, and the demand for supplementary pension insurance is more intense, but it does not reach the tax-free income to participate in personal pensions, and the stage of receiving taxes is to be paid according to the proportion of 3%, the policy is undoubtedly not a tax incentive for the majority of low- and middle-income people to participate in personal pensions but "tax punishment", preferential tax policies can not be "charcoal in the snow", but also can not play a role in increasing the participation rate of personal pensions.
In addition to the EET model, it is more necessary to actively adopt EEE, TEE and other tax models to enhance the tax incentives for personal pensions. The EEE and TEE tax models refer to the fact that individuals who use tax-free income (E) or after-tax income (T) to make personal pension contributions can enjoy tax-free benefits (EE) in the investment and treatment receiving stage. There is no capital gains tax at the stage of personal pension investment and treatment, nor is it taxed because interest, dividends, bonus income or benefits are included in the comprehensive income, so the tax policy is preferential and incentive.
For participants whose income does not meet the tax threshold and do not need to pay individual income tax (e) at the payment stage, or only need to pay a small amount of tax (t), they are exempt from tax (EE) at the stage of investment and treatment, so that personal pensions have tax incentives for the majority of low- and middle-income groups.
Encouraging the majority of low- and middle-income groups to participate in the personal pension system is the key goal of the preferential tax policy, and it is also the function of the preferential tax policy. In order to improve the participation rate of the system, learn from the experience of China's urban and rural residents' pension insurance, Canada and Germany's personal pension system, and even adopt appropriate financial subsidy policies for low-income groups in difficulty to participate in personal pensions.
The preferential tax policy for personal pension is a tax incentive policy, and the fundamental goal of policy design is not to expand tax revenue, but how to promote the development of multi-level and multi-pillar pension system and promote the implementation of the national strategy to actively respond to the challenges of population aging.
China's tax revenue is dominated by indirect taxes such as value-added tax, and the proportion of direct tax revenue such as personal income tax is very limited. In the stage of personal pension payment, investment, and treatment collection, no matter which stage of taxation, the contribution to the overall tax revenue of the country is very limited. In the face of the increasingly severe challenge of population aging at present and for a long time in the future, old-age security is a prominent demand for economic and social development. The tax policy of personal pension tax preference and tax incentive can not only promote the inclusive development of the third pillar personal pension system, but also promote the accumulation of pension insurance, alleviate the risk of aging society, promote economic and social development, and ultimately expand the overall tax revenue of the country.
Of course, in order to give full play to the national income redistribution function of taxation and prevent the personal pension tax policy from becoming an incentive for high-income earners to avoid taxes and excessive disparities in pension treatment, the amount and proportion of personal pension contributions can be restricted.
2. Optimize the restrictions on personal pension contributions, and implement multi-level quota restrictions, regular payment limits, and proportion restrictions in parallel.
The current policy sets a certain limit of 12,000 yuan per person per year, and the original intention of the policy is to prevent high-income groups from avoiding taxes with the help of the personal pension system and preventing excessive differences in pension treatment between different income groups. However, if a single certain amount of restrictions isolates the majority of the policy-permitted population from the personal pension system, the effect of preferential tax policies is greatly limited. The payment quota restriction method can innovate the policy form, better reflect the fairness of taxation and promote the development of the personal pension system.
First of all, a multi-level quota limit is set for people of different ages, and the policy of increasing the payment limit as the age of the participants increases.
The elderly, middle-aged and young people participate in the personal pension system, and the number of years of contribution accumulation varies greatly. A single certain amount is limited to the upper limit of 12,000 yuan per person per year, and young and middle-aged people still have a long period of payment accumulation, and may accumulate a certain scale in the future for a long period of time, playing a certain role in supplementing pension insurance. For the elderly, especially those who are close to retirement, although the demand for supplementary pension insurance is stronger, but the accumulation time of its payment is very limited, even if the top grid participates in the personal pension system, it is impossible to accumulate much pension, the role of supplementary pension insurance is very limited, and the single certain payment limit does not play a role in motivating the elderly, especially the retirees, to participate in the personal pension system.
Set up multi-level payment quota limits, and increase the level of quota limits with the age of system participants, which can match the personal supplementary pension security needs and payment ability of people of different ages, and make the tax policy more fair and reasonable.
Secondly, the quota limit can be either a fixed amount limit for regular payment or a fixed limit for single payment.
In addition to the current annual payment limit policy per person, based on different investment preferences and payment ability of individuals, a single payment limit policy can be set. For example, the policy design can consider the maximum limit of 180,000 yuan per person in the personal pension account before the age of 60 The single payment tax exemption policy: within the limit of 180,000 yuan per person (considering the average pension savings life cycle of about 30 years), individuals can choose the amount of single payment at different times with after-tax or tax-free income or other their own funds, which not only makes the fairness and efficiency of personal pension taxation higher, but also takes into account the individual's age and willingness to participate and financial ability, and can also promote personal pension** Rapid scale expansion.
Third, set preferential tax policies with proportional restrictions.
The basic endowment insurance for employees shall be tax-free at 16% of the salary paid by enterprises and units, and 8% of the salary by individual employees. The enterprise annuity adopts 8% of the total salary of the enterprise (5% of the tax preferential ratio) and 4% of the salary of the individual. Occupational pension units are exempt from tax at 8% of wages and individuals at 4% of wages.
Based on the consistency and coordination of tax policies, personal pensions can also be designed according to a certain proportion of income. The wages and remuneration of different income groups vary greatly, and the limitation of the contribution ratio can better achieve tax fairness than the quota limit.
The preferential tax policy of limiting the proportion of personal pensions can implement the interconnection of the second pillar enterprise annuity and the third pillar personal pension. For a long time, the participation rate of the enterprise annuity system was extremely low. For the majority of enterprise employees who do not participate in the enterprise annuity system, the 4% of the enterprise annuity payment tax exemption treatment of personal salary income can be transferred as the payment tax exemption treatment of participating in the personal pension system, which will not affect the tax revenue, but also quickly increase the system participation rate of enterprise annuity and personal pension.
3. Optimize the tax base of individual income tax, encourage income flow and some residents' wealth stock to invest in personal pensions, and encourage families to invest in personal pensions through mutual assistance.
At present, the personal pension tax policy is aimed at the income of individuals before retirement in the payment stage, and the tax base is the flow and increment of personal income before retirement. If other income flows and asset stocks are encouraged to invest in personal pensions at the same time, and families are encouraged to invest in personal pensions, preferential tax policies will play a great role in stimulating the personal pension system.
The tax policy can encourage retirees to transfer part of the basic pension insurance, enterprise annuity, occupational annuity and housing provident fund to personal pension according to their personal wishes and abilities. Retirees receive basic pensions, enterprise annuities, occupational pensions, and housing provident funds, of which a considerable proportion of funds are suitable and need to be converted into personal pensions. With the development and accumulation of the multi-level and multi-pillar pension security system, the scale of these funds has been expanding. In the face of the objective trend of increasing life expectancy of the population, the tax policy encourages the partial conversion of these funds into personal pensions, which can promote individuals to better cope with longevity risks and promote the accumulation and consumption of individuals throughout the life cycle.
The tax policy can encourage the transfer of part of the wealth of residents after tax to personal pensions. Compared with the flow and increment of personal income before retirement, the wealth of residents has a larger, more considerable and more realistic wealth stock that is converted into personal pensions. A certain proportion of residents' family wealth stock is converted into personal pensions, which has an objective wealth foundation and personal family pension security needs.
After a long period of reform and opening up and economic development, China has formed the world's largest middle-income group and accumulated a huge amount of household wealth. At present, China's household wealth is dominated by real estate and bank deposits, and the savings rate of residents has long been among the highest in the world. In addition to ensuring liquidity needs and investment needs, family wealth accumulation and savings deposits themselves include voluntary preventive pension security arrangements for families.
Through preferential tax policies, some residents' savings and other asset stocks can be converted into pension investment, and individualized personal pensions can be better supported through institutionalized personal pensions to optimize and strengthen old-age security arrangements. The preferential tax policy orientation of personal pension encourages residents to convert part of their stock wealth into personal pensions, which will promote the rapid increase in the participation rate of the personal pension system and the scale of personal pensions.
In addition to the current preferential tax policies for system participants to pay contributions to their personal pension accounts, family members should also be encouraged to support each other to pay on behalf of each other, spouses should be encouraged to invest in each other's personal pension accounts, and parents should be encouraged to invest in personal pensions for their children or children for their parents.
Encourage families to invest in personal pensions with objective and deep demographic, cultural and social foundations. With the change of the age structure of the population, the structure of household expenditure burden changes accordingly. At present and for a long time in the future, China's population "aging" and "declining birthrate" coexist, the old-age dependency ratio continues to increase, and the children's dependency ratio continues to decrease.
With the continuous improvement of the social security system, the education of the young, the education of the young, the income from labor, the medical treatment of the sick, the housing and the support of the weak have gradually been better guaranteed. However, in the context of increasingly severe aging, providing for the elderly has increasingly become the top priority of family security and social security. China's 5,000-year-old focus on family security, respect for the elderly and filial piety culture is deep-rooted, tax policy encourages the family to strengthen mutual pension security through personal pensions, taking advantage of the trend, can promote the construction of inclusive personal pension tax preferential policies, and promote the rapid and inclusive development of the personal pension system.
(The author is a professor in the Department of Finance and Financial Management, School of Business, **University of Finance and Economics;Editor: Yuan Man).