SHARE
COPY LINK

OECD

Europe ‘catching up’ to Sweden’s tax levels

Sweden has once again topped the European tax league, but other countries in Europe are not far behind and catching up fast, according to a new report.

Europe 'catching up' to Sweden's tax levels

For the fourth year running, Sweden has the highest marginal tax rate, 56.6 percent, among OECD countries included in an annual survey carried out by tax consultancy KPMG.

At 55.56 percent, Denmark was close behind Sweden. Spain, the Netherlands, and Finland rounded out the top five.

Both Finland and Spain, as well as Slovenia, were the biggest movers in this year’s report, which saw a total of nine countries raising taxes for high income earners, and four lowering them.

The consultancy found that the global financial crisis had an impact on tax rates in a number of countries.

“Many countries need to consolidate their public finances in the wake of the financial crisis and increasing taxes for high income earners is considered necessary,” Tina Zetterlund, head of the tax department at KPMG in Sweden, said in a statement.

“Even if the increases often give limited revenue to the state coffers, they’re seen as being politically necessary to gain acceptance for benefit reductions that hit low-income earners hard.”

In the report, a marginal tax rate is defined as the tax high-earners pay on their last unit of income. In Sweden’s case, that means high-earners pay 56.6 percent in tax on their last earned krona.

The KPMG data compares tax rates in over 100 countries, including the 33 industrialized countries of the OECD. Hungary pulled in the lowest spot of the OECD countries, with a highest marginal tax rate of just 16 percent.

DON’T MISS: The paradox of Sweden’s ‘lower’ taxes – explained

TT/The Local/og

Follow The Local on Twitter

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

TAXES

Beskæftigelsesfradraget: What is Denmark’s employment allowance?

Denmark's government may soon announce changes to its tax reform plans, which will give all wage earners a bigger employment allowance. What is this and how will it affect foreigners' earnings?

Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance? 

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes. 

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner. 

How did the government agree to change the employment allowance in its coalition deal? 

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment  allowance to 12.75 percent up to a maximum rebate of 53,600 kroner. 

How might this be further increased, according to Børsen? 

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance. 

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement. 

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.  

SHOW COMMENTS