March 3, 2021

University professors warn that modifying the taxation of pension plans will harm 4.3 million workers


Madrid

Updated:

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The intention of the Government in the draft General State Budgets (PGE) of modify the taxation of pension plans, especially individual private ones, reducing the deduction in personal income tax from 8,000 euros to only 2,000 euros and favoring, on the contrary, the one referring to collective plans by increasing it from 8,000 to 10,000 euros has led 21 university professors and professors from all over Spain to launch the voice alert. In his opinion, if the Government finally gives the green light to this measure – which also includes the reduction of deductible amounts by 60% in the case of the spouse’s contribution, from 2,500 euros to 1,000 euros – this it will directly harm 3.2 million self-employed and 4.3 million workers employed by someone else.

The signatories of this manifesto demand that the Executivekeep the current tax treatmentto individual pension plans and have pointed out that the Government’s intention to promote pension systems in the business sphere should not be done at the expense of recreduce the “drastically” capacity of individuals to allocate part of your savings to retirement.

A ‘discriminatory’ measure

For this, they have provided some good reasons that advise withdrawing this reform from the draft General State Budgets (PGE): In the opinion of these academics, due to the structure of the Spanish labor market, establishing different limits on individual contributions to individual pension plans results in “Discriminatory for the vast majority of the Spanish employed population”. In this sense, they have pointed out that it will have a direct impact on the more than 3.2 million self-employed in Spain. In addition, it will also affect employees employed by SMEs, a type of company in which savings for retirement are hardly present. A group that is estimated at about 4.3 million workers. «The individual system will continue to be necessary and essential for all those who cannot access a job saving system in its current configuration », says the signers of the manifesto.

They also believe that the proposed limits on deductions will impact individuals’ ability to save. Specifically, they have ensured that at a rate of 2,000 euros per year a worker or self-employed person can accumulate 80,000 euros if they save during 35 years of professional experience, to which the returns on this capital should be added. In the opinion of the signatories, this is«Clearly insufficient to supplement the pensionpublic and guarantee an adequate total income ”if one considers an average life expectancy of 20 years after reaching retirement age.

“Irregularity” in income

Another factor that the authors of the manifesto have judged that will aggravate the situation is the “irregularity of work income” due to the economical crisis that can occur cyclically and that have an impact on working life, especially in the case of the self-employed. In your opinion, workers should be allowed to regain their ability to save with a view to retirement in the years in which they enjoy some job stability.

International trends do not support it

They also do not believe that international experience supports the Government’s measures and have pointed out that within the European Union (EU) and the OECD there are «Tax incentives for savings and additional tax incentives » for both corporate and individual pension plans. Therefore, the Government’s intention to limit contributions to individual pension systems goes against this trend.

Defer payment and collect less

In any case, these academics have pointed out in their manifesto that the taxation of pension plans is essentially “A deferral of taxation” and that reducing the tax base in the personal income tax of the contributions is subsequently offset with the work performance tax of the benefits. That is, when it comes to rescuing the pension plan and they have warned that the intention to cut tax deductions for contributions to pension plans will result in «A reduction in state tax revenue in the medium and long term ”.

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