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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Denmark scraps popular tax deduction for home improvements

A tax deduction for home improvements, the “håndværkerfradrag”, is to be scrapped in 2022 after parties agreed to end it in next year’s budget.

A popular tax subsidy for home improvements, the
A popular tax subsidy for home improvements, the "håndværkerfradrag", will end in Denmark on April 1st 2022. Photo: Signe Goldmann/Ritzau Scanpix

The government, along with its left wing allies Red Green Alliance, Social Liberals and Socialist People’s Party; and minor parties Alternative and the Christian Democrats, presented the 2022 budget on Monday, including an agreement to drop the home building subsidy.

Sofie Carsten Nielsen, leader of the Social Liberals, said “we are dropping the building subsidy that has ignited the already overheated housing and construction market”.

READ ALSO: Four ways to (legally) lower your tax bill in Denmark

The tax deduction will be removed from April 1st next year. Other tax deductions that can be applied for home services, including cleaning and childcare, are retained.

Tax subsidies for people who hire services in their homes, termed boligjobordningen, were broadened last year as part of government measures to support the economy during the coronavirus crisis.

The provision allowed for a higher tax deduction for the encompassed home services.

Demand for builders has since increased so dramatically that supply can no longer meet demand. As such, the parties behind the budget deal reason that the deduction is no longer needed.

Additionally, the Danish central bank, Nationalbanken, has warned that high demand could contribute to an overheating of the housing market.

Although the deduction was adjusted five years ago to favour green home improvements, the government’s allied parties still maintained they wanted to scrap it.

Nielsen said on Monday that the deduction has put Denmark’s building trade under strain.

“This is an economically responsible budget which also contains huge green decisions,” the Social Liberal leader said.

Finance Minister Nicolai Wammen said that the deduction would remain applicable to other trades, including cleaning, in order to prevent cash-in-hand arrangements.

“The biggest challenge we have in regard to the Danish service industry is in building and extensions. That’s why we are revoking the building element of the (subsidies),” Wammen said.

“But we are very concerned with keeping down cash-in-hand work in the service sector,” he added.