Regressive Effects and Countermeasures of individual income tax deferred pension insurance

In order to reduce the society¡¯s dependence on the first pillar of endowmentinsurance and improve its flexibility, it is imperative for China to develop personalpension insurance. Deferring individual income tax is a type of tax incentive that canstimulate middle and high income earners to participate in personal pension insurance,but it also creates the regressive effect of income reverse regulation, because middleand high income earners can enjoy a larger decline in current period¡¯s tax rate, moretax exemptions for capital gains, and greater gap between inter-period tax rates .Regressive effects originate from the regressive tax system in relation to personalincome tax, this tax system¡¯s design can be optimised such that its incentive functioncan be taken advantage of, while its regressive effect is suppressed. By shifting part ofthe retirement responsibility to middle and high income earners¡¯ themselves, thegovernment can concentrate its financial resources on providing elderly support to lowincome earners, thereby making these individuals the real beneficiaries of theindividual income tax deferral preferential policy. The first pillar of the social securitysystem is to seek fairness, while the third pillar is to pursue efficiency. The presence ofregressive effect of individual income tax deferral should be accepted by society aslong as it can be controlled within a tolerable extent