Title page 1

Contents 5

Abstract 4

Acknowledgements 7

1. Introduction 8

2. The economic and fiscal impacts of population ageing: literature review 9

2.1. The impact of population ageing on growth and productivity 10

2.2. The impact of population ageing on public expenditure 11

2.3. The impact of population ageing on tax revenue 12

3. The potential impact of population ageing on tax revenue 14

3.1. Current distribution of tax bases by age 14

3.2. Potential impact of population ageing on different tax bases 16

3.2.1. Labour income 16

3.2.2. Pension income 18

3.2.3. Capital income and assets 19

3.2.4. Consumption 20

3.2.5. Summary 20

3.3. How tax design influences revenue pressures from ageing 21

3.3.1. Labour income tax design 21

3.3.2. Tax treatment of pensions 22

3.3.3. Capital income and asset tax design 22

3.3.4. Consumption tax design 23

3.3.5. Tax mix 24

4. Simulating the impact of population ageing on tax revenue 26

4.1. Tax by age group 26

4.2. Simulated impact of population ageing on tax revenue 28

5. Tax policy considerations 35

References 38

Annex A. The National Transfer Accounts initiative and data 44

Annex B. Simulation methodology 48

Table 1. Projected change in labour share of income under different scenarios 18

Table 2. Potential impact of population ageing on different tax bases 21

Table 3. NTA variables and database 45

Table 4. Detailed data description by country 46

Figure 1. The working age population share is forecast to decline across the OECD 10

Figure 2. Distribution of tax bases per capita by age across OECD countries 15

Figure 3. Net wealth by age group, 2021 16

Figure 4. Reduced and standard VAT rates 24

Figure 5. CIT tax buoyancy 25

Figure 6. Average tax revenue per capita and population shares by age groups in selected OECD countries 27

Figure 7. Average tax per capita paid by people older than 65 compared to average tax per capita across all age groups 28

Figure 8. Simulated tax-to-GDP ratio, 1950-2060 30

Figure 9. Simulated difference in tax-to-GDP ratio, 2022 and 2060 31

Figure 10. Covariance between simulated revenue impact of population ageing and key variables 32

Figure 11. Simulated difference in tax-to-GDP ratio using average change in age structure, 2022 and 2060 33

Figure 12. Simulated difference in tax per capita ratio, 2022 and 2060 34

Boxes 17

Box 1. The projected change in the labour share of income 17

Box 2. Tax buoyancy in OECD countries 25