Is Simple Better? A Conjoint Analysis of the Effects of Tax Complexity on Employee Preferences Concerning Company Pension Plans

We theoretically and empirically analyze the influence of tax complexity on the employee’s decision concerning company pension plans. Our model also considers employer signaling and information intermediation by various actors. The main result of our empirical analysis is that if tax complexity is high, then only a small proportion of the study participants bases their decision on their after-tax return. This proportion increases significantly if tax complexity is low. However, even in a simple tax system, many people do not base their decisions on after-tax returns, but instead follow the advice of an independent product rating agency or a works council representative.