Examining the European Commission’s proposal for a new pan-European personal pension (PEPP), the European Parliament’s ECON committee has acknowledged evidence that the crucial role tax relief on contributions plays in driving consumer choice for pensions will be a barrier to the creation of a harmonised pension product. Some form of multilateral tax agreement, or information exchange at EU level, are likely to be needed.
In June 2017, the European Commission adopted a proposal for a regulation on a new pan-European personal pension product (PEPP). The proposal was accompanied by a recommendation on tax treatment, encouraging member states to grant PEPPs the same tax relief as national personal pensions products, even if not all the national criteria for tax relief are met.
The European Parliament’s committee on economic and monetary affairs (ECON) has now published a working paper on the Commission’s proposal (see http://bit.ly/2ALqkUQ). This cites a study by Ernst & Young which found that tax incentives on contributions are a ‘pre-condition for PEPP to succeed’ and the ‘main driver for consumer choice’ in pensions.
The ECON committee acknowledges the implications of this finding, making any sort of harmonised product difficult to achieve in the face of wide variations between member states in tax reliefs for individual pension savings.
In addition, the committee notes risks and disadvantages for member states posed by relief on contributions in the case of mobile taxpayers, given the complexity of cross-border tax administration and the risk of tax avoidance or evasion. The committee suggests this could be resolved in a multilateral tax agreement between participating member states, or with EU instruments providing for information exchange and coordination.
Nevertheless, the committee points out that the number of cross-border mobile workers in the EU is limited to around 3.7% of Europeans, only a proportion of whom is likely to take out a PEPP.
Examining the European Commission’s proposal for a new pan-European personal pension (PEPP), the European Parliament’s ECON committee has acknowledged evidence that the crucial role tax relief on contributions plays in driving consumer choice for pensions will be a barrier to the creation of a harmonised pension product. Some form of multilateral tax agreement, or information exchange at EU level, are likely to be needed.
In June 2017, the European Commission adopted a proposal for a regulation on a new pan-European personal pension product (PEPP). The proposal was accompanied by a recommendation on tax treatment, encouraging member states to grant PEPPs the same tax relief as national personal pensions products, even if not all the national criteria for tax relief are met.
The European Parliament’s committee on economic and monetary affairs (ECON) has now published a working paper on the Commission’s proposal (see http://bit.ly/2ALqkUQ). This cites a study by Ernst & Young which found that tax incentives on contributions are a ‘pre-condition for PEPP to succeed’ and the ‘main driver for consumer choice’ in pensions.
The ECON committee acknowledges the implications of this finding, making any sort of harmonised product difficult to achieve in the face of wide variations between member states in tax reliefs for individual pension savings.
In addition, the committee notes risks and disadvantages for member states posed by relief on contributions in the case of mobile taxpayers, given the complexity of cross-border tax administration and the risk of tax avoidance or evasion. The committee suggests this could be resolved in a multilateral tax agreement between participating member states, or with EU instruments providing for information exchange and coordination.
Nevertheless, the committee points out that the number of cross-border mobile workers in the EU is limited to around 3.7% of Europeans, only a proportion of whom is likely to take out a PEPP.
