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Denmark no longer has OECD’s highest tax revenues

Denmark has been overtaken by France in a calculation of comparative tax revenues in the 36 countries in the OECD (Organisation for Economic Co-operation and Development).

Published: 5 December 2018 18:42 CET

Denmark no longer has OECD’s highest tax revenues

Photo: Kristian Djurhuus/Ritzau Scanpix

Since 2002, Denmark has topped the list of countries of OECD countries with the highest overall tax revenues.

But in the latest calculations by the intergovernmental economic organisation, which are based on figures from 2017 and published on Wednesday, Denmark has been overtaken – by France.

With an overall tax revenue of 46.2 percent of GDP, France moves above Denmark, which has a corresponding figure of 46.0 percent of GDP – down from 46.2 percent the previous year.

That places Denmark at number two on the overall list, with Mexico at the opposite end of the scale with taxes at 16.2 percent of GDP.

France is currently in the midst of weeks of social unrest over high living costs.

Meanwhile, comparison with neighbouring Sweden provides a better basis for comparison of Denmark’s taxes, Mads Lundby Hansen, lead economist with thinktank Cepos, said to Ritzau.

“Sweden is at 44 percent, two percent lower than Denmark,” Hansen said.

“That is the equivalent of around 40 billion kroner and is partly due to the fact that they have no vehicle registration tax [Danish: registreringsafgift, ed.],” he added.

Denmark’s tax revenue has remained close to 46 percent since 2000.

READ ALSO: Denmark still has world's highest taxes: report (from 2017)

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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