Commercial Pension Insurance Program Design and Estimated of Tax Incentives---- Based on Analysis of Enterprise Annuity Tax Incentives

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1 Iteratoal Joural of Busess ad Socal Scece Vol 5, No ; October 204 Commercal Peso Isurace Program Desg ad Estmated of Tax Icetves---- Based o Aalyss of Eterprse Auty Tax Icetves Huag Xue, Lu Yatg School of Maagemet Shagha Uversty of Egeerg Scece Abstract Taxes as the prmary meas of state terveto ad regulato of socal ad ecoomc developmet, whle ecouragg the developmet of commercal peso surace also plays a mportat role Uder ecouragg of the govermet's tax cetves, dvduals from ther ow terests, wll crease the tatve of partcpatg the commercal peso surace Ths paper aalyzes ad estmates peso replacemet rate ad loss of atoal reveue, uder the auty tax cetves, costructs the commercal peso of tax cetve surace replacemet rate model We fd that the commercal peso surace of tax cetves has lttle mpact o reveue, but ca actvely promote the developmet of commercal peso surace Keyword: Commercal peso surace; tax cetves; eterprse auty Form "Cha Agg Developmet Report (203) by the ed of 202,we foud out the umber of elderly populato Cha has reached 94 mllo, a crease of 89 mllo over the prevous year, 43% of the total populato Due to the large umber of elderly populato, the govermet bears heavy faces To allevate the facal expedture o old-age surace, the govermet must cosder reducg the replacemet rate of the basc peso surace order to mata the sustaable developmet of basc socal peso surace Eterprse auty ad commercal peso surace play a mportat role allevatg pressure o govermet pesos, whle also mprovg the level of dvdual peso treatmet So how to arrage the three-pllar peso premum replacemet rate s a mportat cosderato for polcy adjustmets As the eterprse auty ad peso surace busess s restrcted all aspects, there has ot bee wdely developed Coverage s lmted, they do ot acheve the desred level of peso replacemet rate Combed wth auty come tax preferetal polces of the 204 Cha s mplmetato, we wll measure chages the peso replacemet rate before ad after the polcy, expectg that these calculatos ca provde a referece for the choce of commercal peso surace tax cetves mode The Eterprse Auty Preferetal Effect Aalyss Eterprse auty as the secod pllar of peso surace, s a supplemetary peso surace, whle establshed by govermet order to better protect the eterprse employees after retremet ad mprove the socal securty system Eterprse auty s establshed accordace wth the atoal polcy of volutary, ot madatory O the other had coverage of eterprse auty s relatvely small Oly a few large compaes, whle have good effcecy, establsh the eterprse auty Accordg to the ews of the Mstry of Huma Resources ad Socal Securty, 203 Cha, t had 66,20 eterprses establshed eterprse auty The umber of partcpated the eterprse auty s 20,560,000 However, the total umber of eterprses s about 47 mllo Compay, whle bult the eterprse auty, s less tha 05%of the total umber At the ed of 203, the umber of people whle partcpated basc peso surace was 322,20,000 across the coutry, but the umber of worers partcpatg the eterprse auty s less tha 7% of the total sured To chage ths stuato, promotg the developmet of mult-level old-age surace system, Sce Jauary, 204, govermet promulgated ad mplemeted persoal come tax deferred auty polces The artcle fuded by Shagha Uversty of Egeerg Scece graduate programs(e ) 5

2 Ceter for Promotg Ideas, USA wwwjbssetcom Polcy allowed paymet that uts ad dvduals do ot exceed the prescrbed stadards of corporate peso or occupatoal peso, ca be deducted before the persoal come tax; Ivestmet come from the busess for persoal peso or occupatoal peso fud exempt from persoal come tax; The actual collecto of persoal or occupatoal peso auty requred persoal come tax It ca be see that Cha's eterprse auty tax model paradgm shft from the tradtoal TEE became EET mode Establshmet of Eterprse Auty Actuaral Models uder TEE ad EET Mode Select the Model Assumptos ad Varables Cha's Eterprse Auty s pad by busesses ad dvduals together to buld eterprse auty persoal accouts, ad persoal Accout mplemet maret-oreted vestmet operatos Therefore, the fal accumulated value of corporate peso persoal accouts equal to the amout of persoal accouts actuaral preset value of future paymets I the eterprse auty actuaral model, we assume that the dvdual accout peso auty paymet s a begg of a lfetme paymet of $ A lfe auty, wthout cosderg early retremet, uemploymet, etc, wthout cosderg all trasacto costs ad maagemet fees, as well as the case of fxed premums w g c q a b r t0 t ß Table : Varable Names ad Symbols Explaed 2 Eterprse Auty Actuaral Models of TEE Model a The total amout of persoal accout: M Average wage levels Average wage growth rate Cotrbuto rate The total umber of worers to partcpate the eterprse auty Age worers beg to pay Age of stoppg paymet (retremet) Paymet perod Ivestmet yeld Persoal come tax rate Persoal come tax rate of collecto Survval after retremet age Iterest rate Peso replacemet rate The accumulated amout of the frst year: cw( t0) cw( t ) r cw( t )( g) The accumulated amout of the secod year: N-year cumulatve amout of fuds: 0 0 cw g g r g r g r t Or: 2 2 ( ) ( ) ( ) ( ) ( ) ( )( ) ( 0) ( ) j j ( ) ( 0 ) j M cw g r t b Preset value of future actuaral dvdual accout paymet amout: N Actuaral formulas for lfe autes survval that pay $ at begg: PV v P 0,( v s dscout factor, P :the probablty of survval that polcyholders lve to b + perod) Thus, the actuaral preset value of peso beefts upo retremet for each year the amout of the termato paymet after N years: N A P ( ) ( A s a persoal accout to receve stadard 0 52

3 Iteratoal Joural of Busess ad Socal Scece Vol 5, No ; October 204 I whch, A satsfes: A w( g) ) The we obta, N w( g) P ( ) 0 Accordg to the actuaral balace prcple, M=N So, we ca get a peso replacemet rate: c ( t ) ( g) ( r) 0 j 0 j j ( g) P ( ) j j The total govermet facal loss: T qcw ( g) ( r) t 0 0 j 3 Eterprse Auty Actuaral Models of EET Model Accordg to the prcples of corporate peso actuaral of TEE mode, we ca speculate that auty actuaral models uder the EET mode: M cw ( g) ( r) j j j Uder EET mode, the amout of fuds accumulated after-tax accouts: Preset value of future actuaral dvdual accout paymet amout: The eterprse auty peso replacemet rate of EET ca be obtaed by M ad N: c ( t ) ( g) ( r) j j j ( g) P ( ) 0 2Parameter Assumptos ad Actuaral Cocluso j j j M cw ( g) ( r) ( t ) N w( g) P ( ) 2 The Basc Parameter Assumptos I the calculato process, suppose a perso from the age of 25 to wor o eterprse auty paymet Whe he or she retred, male (60 years old retred) pay 35 years ad wome (55 years of retremet) cotrbutos for 30 years Ad sured worers base pay for each year s equal to the average wage the prevous year, Corporate peso cotrbuto rate should ot exceed /6 of wages (cludg corporate cotrbutos ad dvdual cotrbutos) I the vew of the compay s paymet, we assume the cotrbuto rate s 8%, whch s more le wth the actual stuato Ad assumg the paymet auty paymet based o a yearly bass I 202, atoal urba average wage of worers the post s 47,593 Assumg omal average wage growth rate s 5%I 203 the umber of partcpatg eterprse auty s 20,560,000 I recet years, vestmet yeld of eterprse auty s mataed at aroud 6%, aual terest rate of 3% Survval probablty dstrbuto s based o Cha Lfe Isurace Mortalty Table ( ) peso busess table secto (me ad wome), ad the hghest age at death s 05 years old Cha's persoal come tax rate ad the average wage calculated uder TEE mode auty paymet at the rate of 3% Table 2: The Basc Parameter Assumptos Parameter a b c g r q t 0 t Value 25 (60,55) (35,30) 8% 5% 6% 3% 2056 万 3% 3% 0 53

4 Ceter for Promotg Ideas, USA wwwjbssetcom 22 Actuaral Results Accordg to Table 2 ad sad model parameters ca be calculated: Wome (Retre at the age of 55) Me (Retre at the age of 60) TEE mode EET mode TEE mode EET mode The total accumulated amout of 480,36 494,985 78, ,470 persoal accouts Peso replacemet rate 247% 286% 657% 708% The aual amout of recept 9,253 9,848 3,6 32,078 The govermet exteded tax of the frst year 275,98,000 I TEE mode, male 60-year-old retremet peso replacemet rate s 657%, but female at 55-year-old of 247% After the tax deferred auty cetves, uder EET model, male 60-year-old retred peso replacemet rate s 708%, female (55-year-old) of 286% Exteso of the tax the frst year s 270 mllo The exteso of the tax wll grow accordg to a aual average growth rate of wage each year From the results of the actuaral pot of vew, the dvdual peso replacemet rate has ot sgfcatly mproved, but ca reduce the curret persoal come tax burde ad mprove the lvg stadards of retremet The mpact o govermet reveue s ot great 2 Commercal Peso Isurace Tax Icetves Desg ad Reveue Forecast We ca see from the above, the persoal come tax deferred of auty cetves has reduced the burde o dvduals ad busesses Compared wth the secod pllar of the auty, the thrd pllar of the commercal peso surace wll ot cosder compaes effectveess So t has greater coverage Therefore, f we ca mprove the tatve of dvduals to partcpate the commercal peso surace, to a certa extet, t wll crease the replacemet rate of pesos The rapd developmet of commercal peso surace ca provde better peso protecto for dvduals, but also to mprove the sustaablty of the frst pllar, ad promote the developmet of the commercal surace maret As a tax cetves, tax deferred polces have brought some beefts dvduals ad busesses Therefore, we may wsh to cosder the persoal come tax deferred auty preferetal referece to commercal peso surace the past I ths paper, we put tradtoal commercal peso surace as a example I ths paper, we put tradtoal commercal peso surace as a example I tradtoal commercal peso surace, the sured perso ad the surace compay sged a cotract, the partes agreed tme ad determed pesoers receve credts Geerally speag, the etre paymet rates uchaged durg the perod, the terest rate per aum ad expected frequeces are also determed Ths s a madatory depost surace Accordg to the relevat corporate peso actuaral model, we ca descrbe the commercal peso surace actuaral models after tag the tax deferred polcy Commercal peso surace plas that surace compay lauched geerally pay a aual uts Assumg persoal expedtures for the purchase of commercal peso surace accouted for the proporto of fxed salary Its aual come s w, ad the wage growth rate s g Expedtures for commercal peso surace s cw, ad peso fud eargs rate s r Pror to the tax cetves of commercal peso surace rate s t 0, but after the polcy rate s t Accumulated value of the premum the paymet perod s amout of the premum after tax s The amout receved: j j j M qcw ( g) ( r) j M qcw ( g) ( r) ( t ) N w( g) q P ( ) 0 j j Accumulated 54

5 Iteratoal Joural of Busess ad Socal Scece Vol 5, No ; October 204 j j The amout of tax cocessos: T0 qcw ( g) ( r) t0 2 Parameter Assumptos ad Results j Ule socal edowmet surace, commercal peso surace ca be sured at ay tme From the sured perso's age, the age of the sured were selected 30,35,40,45 We assume that the aual start recevg peso fuds s tatamout to retremet age(me aged 60, 55-year-old woma) Assumg that omal average wage growth rate s 5%, ad vestmet yeld of commercal peso surace remaed at about 6%, ad Iterest rate s 3% Survval probablty dstrbuto s based o Cha Lfe Isurace Mortalty Table ( ) peso busess table secto (me ad wome), ad the hghest age at death s 05 years old Table 3: The Basc Parameter Assumptos Parameter c g r t Value 0% 5% 6% 3% 3% We assume that a mddle-come wage level s approxmately equal to the average level of socety (the average wage 202 was 47,593) Commercal peso surace premum s 0% of the wage rates, ad aroud 4,800 per year 4800 aual premum for example Me (Retre at the age of 60 Wome (Retre at the age of 55) The total accumulated amout The amout of recept Peso replacemet rate 39% 8% 92% 67% 09% 85% 62% 39% 22Cocluso Aalyss a Tax deferred peso surace polcy s a effectve way to reasoable tax, ad t have greater appeal for the mddle-come b The lower the amout of tax deferred peso surace busess ca acheve a hgher replacemet rate c Commercal peso surace premum tax deferred has less mpact o the facal result 3 Advce ad Isprato Wth the creasg agg populato Cha, as well as commo teratoal practce, a tax-deferred peso surace tax cetves potetal to become evtable For dvduals to spea, commercal peso surace tax cetves ca reduce the persoal tax burde, empower dvduals to partcpate the commercal peso surace ethusasm Ths ca rase peso come replacemet rate ad the level of retremet stage, so that the elderly ca share the fruts of ecoomc developmet For busesses, commercal peso surace compaes tax cetves ca cut spedg, mprove the eterprses to establsh eterprse auty ethusasm Such a polcy s ot oly for the developmet of eterprses the captal of cocessos, but also the mplct the promoto of huma resources For surace compaes, to crease the umber of surace compaes has brought greater effcecy, promotg the developmet of commercal surace ths supplemetal surace Fally, as a atoal, log-term pot of vew, the commercal peso surace wll help mprove atoal welfare, reduce the peso burde o the frst pllar of sustaable developmet of socal edowmet surace, ad promotg sustaable ecoomc ad socal stablty ad harmoous developmet Refereces Shagha Isurace Regulatory Commsso Shagha persoal tax-deferred peso surace operato mechasm project report[ R ] 2007 L Xufag Isurace Actuaral[ M ] Bejg: Cha Rem Uversty Press, 2008 ( 2) Wag Yal, Lu yag Dscusso of the mplemetato of a tax-deferred peso surace [ J ] Zhejag Facal, 200 ( 7) Zhu zhogqu Commercal peso surace ad tax ssues the developmet of polcy recommedatos [J] Chese facal, 2007(2) Zhu chegb Ecoomc aalyss of tax cetves [M]Bejg: Ecoomc Scece Press, 2005 LI chao, We qaoq Dscusso o tax-deferred peso surace-related ssues of persoal [J] Shagha Isurace, 200 (6) Lu chagg Chese eterprse auty wage replacemet rate sestvty study [J] global ecoomy2005,(0) 55