Page 21 - IDEA Study 7 2015 Working Beyond Pensionable Age

Graph 9: Average gross participation tax rate conditional on age and gender Source: SILC 2012 for the Czech Republic, TAXBEN, own computations The situation was different in 2013, when provision, which forbid pensioners to claim taxpayer tax credit, came into effect. Pensioners, because of this limitation, faced even higher participation tax rates than their prime age colleagues. Graph 10 shows that here was a significant increase in the gross participation tax rate when males and females started to receive the old age pension (women between 58 and 59 years and men between 62 and 63). In other words, working pensioners contributed a higher share of their job earnings to the public budgets than working individuals around 50 years of age. This meant that the tax system discouraged pensioners from working, more than it disincentivized their colleagues around age of 50. Therefore, individuals after reaching retirement age were tempted to leave labour market and become pensioners not only because of their guaranteed unconditional income but also because of decrease in institutional incentives to work caused by higher tax burden. Although this provision was cancelled already during 2013 and pensioners were allowed to claim taxpayer tax credit for the year 2013, a significant number of pensioners reacted to this change in taxation, which they believed was permanent – a large number of working pensioners tried to avoid any additional taxation, for example by interrupting their old age pension income for a short period (e.g. several days), which suggests there is high elasticity among working pensioners. 19