Study On Taxation Incentives Of Annuity Insurance Of Private Pension

Building up multiple-pillar social security system was first introduced in 《Averting the old age crisis》 reported by the World Bank. The first pillar of social security system is the social basic old-age insurance compulsorily operated by the government; the second pillar is the enterprise pension involved employers and employees; the last pillar is the private pensions participated voluntarily by individuals. However, in China, deficiencies of the first two pillars like low substitution rate because of the short time development, lead to some social and economic problems when facing the shifting of demographic structure and accelerating of population aging. Therefore, it is essential and urgent to vigorously develop the third pillar of social security system, not only to complete the financial system, optimize the monetary assets, but also to maintain social harmony and stability.Private pension annuity insurance is an alternative scheme to the state pension, into which individuals voluntarily contribute certain amount of earnings, and then start to gain pensions at regular intervals after certain age, according to the contract. Under the background of aging and transformation of life insurance companies, this thesis studies about Private pension annuity insurance because of the function of satisfying the security requirements and the rapid developing pension market.In various ways to promote the third pillar of social security system, this thesis studies private pension annuity insurance from the point of tax incentives, and evaluates the effectiveness of tax incentives. The substitution and income effect of taxation affect the demand curve of private pension annuity insurance. Also, the deferred tax stimulates the demand of customers. This thesis discusses the leverage effect of tax deduction or exemption, trying to prove tax exemption has positive effect on private pension annuity insurance for customers, insurance companies and the government with microeconomics. Meanwhile, this thesis summarizes the taxation preference policies in different periods of deductibility of premiums, interest build-up and proceeds during lifetime. By micro-empirical analysis and comparing with developed countries, this thesis concludes EET model is optimal.In addition, this thesis briefly introduces the situation of private pension annuity insurance in OECD countries, and predicts the rising trend through linear regression. Then, this thesis reviews the history of taxation reform in America, England and Japan, to prove the positive effect on demand of private pension annuity insurance. Moreover, this thesis explores the preferential extent under the EET model, using the data of Shanghai as a sample and makes some suggestions and supporting measures on preferential taxation policies based on Chinese situation.This thesis consists of5chapters as below:Chapter1is the introduction part, bringing in the research topic—taxation incentives of private pension annuity insurance, under the background of accelerating of population aging, deficiencies of the first two pillars of social security system and transformation of life insurance companies. Meanwhile, the first chapter briefly introduces the research background, research significance, the internal and abroad literature review, framework and innovations and deficiencies of this thesis.Chapter2clearly defines the private pension annuity insurance and taxation incentives, also explains the economic fundamental of taxation. This chapter discusses how the substitution and income effect of taxation affect the demand of private pension annuity insurance, and proves that the leverage effect of taxation incentives has positive effect on costumers, insurance companies and the government.Chapter3classifies the models of taxation incentives in most countries. Firstly, this chapter summarizes the taxation preference policies in different periods of deductibility of premiums, interest build-up and proceeds during lifetime, proving EET model is the most popular one around the world. Secondly, this chapter compares the present value of pension accumulation and loss of taxation under8models, concluding that EET model is optimal.Chapter4is the apocalypse of developed experience of taxation incentives in OECD countries. This chapter explains the reason why OECD is the object of study, and introduces the situation of private pension annuity insurance in OECD countries in detail. Next, this chapter concludes the thoughts and apocalypse on taxation policies through looking back the history of taxation reform in America, England and Japan.Chapter5is the suggestions and supporting measures on taxation incentives based on Chinese situation. This chapter firstly introduces the situation of private pension annuity insurance and trend of taxation policies in China, and estimates the preferential limit should be950RMB under EET model, using the data of Shanghai as a sample. Afterwards, this chapter makes some suggestions and supporting measures on preferential taxation policies.The innovations of this thesis are as follows:1. The object of study is the private pension annuity insurance specifically, no longer the life insurance industry or social security system as other documents published.2. This thesis tries to discover the preferential extent of taxation, based on Chinese situation and a simple model. The deficiencies of this thesis are as below:1. Due to the difficulty in data collection and screening, it is hard to present a micro-empirical model of the relationship between taxation incentives and demand.2. The results are estimated based on certain assumptions or hypothesis, and need for further research.