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Danes face the world’s highest tax burden

Denmark is the most taxed country in the world with nearly half of its GDP raised through taxes, giving it a tax-to-GDP ratio that towers over the other OECD countries.

Danes face the world's highest tax burden
Approximately what the average Danish taxpayer has left after the tax man takes his share. Photo: Colourbox
Danes are the most heavily taxed people in the world and taxes are rising in Denmark at a rate that outpaces most other nations. 
 
A newly-released report from the Organization for Economic Cooperation and Development (OECD) shows that the tax burden in Denmark stood at 48.6 percent in 2013, the highest among the 34 OECD member countries. 
 
While the OECD average was an increase from 33.7 to 34.1 percent between 2012 and 2013, Denmark’s rate increased from 47.2 to 48.6 percent. The rise of 1.4 percentage points is over three times higher than the average tax increase in the same period. 
 
By basically every measure, Denmark taxes its residents more than most countries – filling its state coffers with higher revenues from taxes on income, profits and capital gains than the OECD average. In fact, the income that Denmark raises by taxing income, profits and capital gains accounts for 62 percent of its total tax revenues, nearly double the OECD average of 34 percent.
 
The 30.7 percent tax on income and profits dwarfs the OECD average of 11.4 percent and is well above the next highest nation Norway, which takes 18.6 percent of its employees’ incomes. 
 
The 25 percent Danish VAT is also significantly above the OECD average, which sits at 19.1 percent, although Denmark has the same VAT rate as Norway and Sweden and is topped by both Iceland and Hungary.  
 
According to the OECD, overall taxation among the world’s top economies rose to the highest level in six years in 2013.
 
Tax receipts collected by OECD countries went from an average of 33.7 percent of the GDP in 2012 to 34.1 in 2013. 
 
Denmark’s leading tax burden was followed by France and Belgium.

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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.  

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