Revenue-Generating Potential of Taxation for Older-Age Social Pensions
Social security and taxation operate jointly to overcome individual deprivations, reduce income inequality and promote development, bringing ‘taxation into social protection analysis and planning’. There are several ways in which governments can create fiscal space to finance social protection programmes (e.g. social pensions). The idea is to create new sources of revenue –sustainable in the long-run – which can be used to finance social pensions, without building new liabilities and without distorting macroeconomic stability. The literature specifically addressing the potential fiscal space that could be created to finance social pensions is limited. This paper aims to begin filling some of those gaps and identify sources for creating fiscal space for social pensions through the revenue side (i.e. examine the revenue-generating potential of taxation for social pensions). Specifically, examine the potential funding power of three types of taxes (income tax, corporate tax, and trade tax) using cross-country tax revenues and tax rate data in a global perspective. The paper demonstrates that the three taxes have a revenue-generating potential to finance social pensions in several countries. There is not a magic prescription useful for every country, but there are numerous options to design a tailored mix of sources to create fiscal space.
KeywordsSocial pensions Fiscal space Social protection Tax revenue Taxation Cash transfers Poverty reduction
Compliance with Ethical Standards
Conflict of Interest
The author declares that he has no conflict of interest.
Informed consent was obtained from all individual participants included in the study.
Ethical Treatment of Experimental Subjects (Animal and Human)
This article does not contain any studies with human participants performed by any of the authors.
This study was funded by Help Age International, while the author was a Research Fellow.
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