Seven national tax systems through the lens of retail-investor representatives: lessons for the Savings and Investments Union
Europe’s true challenge is not a shortage of household savings in aggregate, but the limited conversion of those savings into suitable long-term investments that support citizens’ financial outcomes, whether for retirement, major life projects or greater financial resilience.
While taxation is not the sole explanation for low retail participation, it remains a central driver of household allocation. Combined with product design, distribution, financial capability and household preferences, it can compound the incentives and frictions that determine whether savings remain in deposits, flow into directly held listed securities, or are channelled towards specific funds or tax-favoured insurance, pension and other investment-account structures or wrappers.
To better understand how taxation can stimulate or hinder retail investment, this paper compares standard brokerage accounts and dedicated savings and investment account structures across seven European jurisdictions: Sweden, Germany, France, the United Kingdom, the Netherlands, Estonia and Iceland. Drawing on questionnaires completed by retail investor representatives, it seeks to examines three interconnected tax distortions: neutrality and product bias, administrative friction, and inflation or real-return distortion. The qualitative comparison highlights several distinct national ‘archetypes’, each revealing different strengths, limitations and trade-offs.
While Sweden’s ISK combines a simple annual account-value tax with extensive automation, Estonia offers account-level tax deferral until withdrawals exceed cumulative contributions. The United Kingdom provides ISA account structures under which qualifying investment income and gains are exempt from tax, subject to applicable contribution limits and ISA rules. France combines a tax-advantaged equity account with a savings landscape strongly shaped by regulated savings and life insurance. Germany displays significant elements of domestic tax simplicity, notably through automatic withholding, while France also benefits from provider-assisted reporting and withholding. At the same time, both systems continue to favour competing tax-advantaged savings structures: principally insurance- and pension-linked products in Germany, and insurance, regulated savings and other tax-favoured structures in France. The Netherlands applies deemed-return taxation, whereas Iceland combines a relatively simple flat-tax regime with narrow loss recognition, particularly across investments and tax years. Further, Sweden’s ISK model demonstrates the value of simplicity and visibility, although this simplicity comes with a clear trade-off: its wealth-tax-like annual taxation may apply even where investment performance is weak or negative in a given year. Interestingly, Estonia’s model particularly facilitates reinvestment, contribution-and-withdrawal netting and portfolio rebalancing by leveraging tax deferral for investors, yet accumulated returns ultimately remain taxed in nominal rather than real terms. The Netherlands, while displaying relatively simple tax administration, illustrates that administrative simplicity cannot fully compensate for a tax base that may diverge from actual investment performance. Turning back to France and Germany, both illustrate how stronger advantages granted to competing savings products may weaken incentives for direct securities investment. The United Kingdom, meanwhile, confirms that even a generous tax-free account cannot, by itself, overcome wider barriers (such as limited disposable income, housing preferences or insufficient financial engagement).
In brief, while each archetype offers useful lessons, none is without trade-offs. One common weakness stands out across the jurisdictions examined: no convincing and comprehensive mechanism was identified to adjust taxable investment returns systematically for inflation.
The main lesson is therefore not that one archetype should be replicated across Europe, but that policymakers should consider how the different features interact. Tax incentives alone are not enough. In fact, successful account structures require mutually reinforcing elements: a clear incentive, simple administration and easy reporting, broad and comprehensible investment access, portability, provider viability, policy stability and sufficient visibility among ordinary investors. Tax timing also matters: deferral can support compounding and reduce the annual tax drag, since it mitigates the distortion created by taxing nominal instead of real returns. Ultimately, taxation remains primarily a Member State competence. The immediate priority should therefore be for national jurisdictions to develop the most retail-friendly account structures possible, drawing on the European Commission’s overarching SIU blueprint while adapting it to domestic tax systems, savings markets and investor needs. National implementation should not, however, entrench further fragmentation: compatible reporting standards, provider portability and the avoidance of unnecessary cross-border barriers should be considered from the outset.
As a second step, greater European integration could build on these national structures through common minimum criteria, interoperable reporting and arrangements allowing investors to transfer assets between equivalent accounts across borders to create an EU-wide label. In the longer term, a supplementary pan-European SIU account could also be envisaged as a new European archetype, supported by forms of incentive agreed among participating Member States, without necessarily requiring full harmonisation of personal taxation. Properly designed, such a framework could help broaden existing national home biases into a more European investment orientation (while preserving investor choice and diversification), thereby strengthening the attractiveness and integration of European capital markets. The objective is not simply to add a new account in the legislation. It is to build a fully portable and competitive account structure that ordinary investors can recognise, understand, trust and use to build long-term wealth across an increasingly integrated European market.
** Read & Download the Report **