Study Of Reversed Compensation Inner Tax Incentives Practice Of China’s Enterprise Annuity

Since the late1980s, affected by the economic recession and the aging population as well as other factors, the basic old-age insurance system of many countries began to fall into serious financial paying crisis. As a result, many welfare states began to adjust welfare strategy, so enterprise annuity was brought into the social security system, and in order to encourage enterprises to establish EA plans, multiple incentives were provided including tax incentives, which added the redistribution function into EA and required certain fairness.In the1990s, China also adopted the similar strategy, bringing the annuity into pension system in order to alleviate the mounting financial pressure. However, unexpectedly, the implementation of enterprise annuity may result in a new pension gap, especially the reversed compensation inner tax incentives practice. This study focuses on this issue, conducting an empirical research on the status of enterprise annuity, and the findings indicate that opportunities to participate in the annuity and levels of benefits are obviously different between different groups. Followed by the principle in pension system, the probability of gaining enterprise annuity also relies on the ability of employees and employers in labor market, which means there exists a high correlation among the three factors as income, basic pension and annuity. So the tax incentives are probably beneficial for the high-income earners and on the other hand expands the pension gap between employees, which could be called as certain amount of regressive tax compensation. This is not only resulted in the inadequate coverage of enterprise annuity, unreasonable tax policy, but also in some reasons inner system, like the relationship between government and the market in the reform of the pension system, and the trade-offs related to the policy supply system, which is rooted in the inherent logic of welfare resource allocation.Objectively speaking, the enterprise annuity is an effective measure to alleviate the pressure of financial paying system, and has already played an indispensable role in multi-pillar old-age system; but in a transition country like China, EA system is also a method of redistribution, and may cause reversed compensation, which needs high attention.