Tax Treatment of Public and Private Pensions

Different approaches to taxing public pensions and to social security contributions can be explained by differences in emphasis on various social models in different countries and by inconsistencies in the implementation of social and fiscal reforms. The concept of funding of public health care is of essential importance as well. Occupational schemes acquired after the Second World War a significant role in pension systems and have become their second most important pillar. In a number of countries they have this status till today, despite modern pension theory tends to replace them by personal pensions, but these usually have a much higher overhead costs. Tax theory is not uniform in approach to the taxation of personal pensions, in practice there is a considerable tendency to stimulate significant retirement savings and ignore the fiscal costs associated with it. EU tax policy rejects taxation of personal pensions and other financial services by VAT on the basis of alleged technical problem with the taxing of margin. Taxation and subsidization of pensions in Czechia requires a fundamental reform. The paper may be a background for such a reform.