Ask Kay: Why is Denmark so expensive?

Kay Xander Mellish is an American who has lived in Denmark for 14 years and answered many questions from new arrivals and people thinking of moving to Denmark. She is the author of the new book How To Live in Denmark, available on Amazon.com, Saxo.com and iTunes, and offers How To Live in Denmark events for schools, unions and corporations, as well as a free podcast. 

 

Hi Kay. I am considering moving my family to Denmark from the United Arab Emirates, but I have heard that the cost of living in Denmark is very high, that buying a car is almost impossible and that taxes are outrageous. Is it easy to live with my wife and three kids on my salary only?   

 

Denmark IS expensive, and in a lot of unexpected ways.

 

One example: socks. Like a lot of foreigners, I do most of my shopping in my home country and come back to Denmark with a big fat suitcase. But this year I forgot to buy enough socks. Ordinary, white, cotton socks. I ran out.  

 

At home, nice socks might cost a dollar a pair. At the cheapest place I could find in Denmark, white cotton socks cost 13 kroner per sock, about $2.50 or 2 euro per sock. That’s a very high per-sock-price. And most of it does not go to the Vietnamese or Bangladeshi worker who produced that sock. 

 

Where does the money go? Why are things so expensive in Denmark?

 

I paid 13 kroner for each sock, but 2.5 kroner was actually sales tax, VAT (called moms in Danish). That goes directly to the government. So the store got 11.5 kroner.  The store pays 25 percent corporate tax, which means that 41 percent of my sock payment has already gone to the Danish government.

 

Now out of what’s left, the store probably pays its employees at least 100 kroner an hour – at least 38 percent of which they’ll pay in income taxes – and then the store pays for rent, electricity, and cleaning – all of which are taxed too.  

 

So, bottom line, I estimate that of the 13 kroner I paid for a single sock, 75 percent off it went to the Danish state in one form or another. The rest is the store's profit and – you know – goes to pay for the actual sock. 

 

So, you're right – things are expensive in Denmark. But a lot of expenses you have in other countries, you won’t have here.  

 

You don’t need a car in many places, which means you don’t need car insurance or gasoline.  If you want to put your kids in daycare, it’s subsidized by taxes, and even most private schools are heavily subsidized.  You don’t have to save up for health care emergencies or for university, the way you do in many countries, as these expenses are partly covered by those crazy sock taxes.  

 

And, coming from the UAE, you will certainly find that your air conditioning bills will drop sharply. 

 

The person you should really talk to before making the move is your wife. While in many parts of the world, mom or dad stays home as a full-time caregiver, the Danish tax structure makes that difficult. Income taxes rates here are some of the highest in the world, and there is no tax write-off for an adult who takes care of children full-time. The Danish way is to put the kids in government-funded daycare and then send both parents off to work full-time.  Is your wife on board with that?