Denmark no longer EU’s number one tax nation as France takes over: ministry

Tax paid in Denmark constituted 45 percent of the country’s GDP in 2017, according to a Danish Ministry of Taxation analysis.

Denmark no longer EU’s number one tax nation as France takes over: ministry
Danish 50 kroner notes in production. Photo: Ólafur Steinar Gestsson/Ritzau Scanpix

The ministry analysis compares Denmark’s overall tax demands with other countries and has concluded that Denmark no longer has the highest tax in the EU, newspaper Børsen reports.

“The unwanted first place we’ve had in relation to high tax has now been passed on to our friends in France,” Danish tax minister Karsten Lauritzen told Børsen.

An OECD report last year found Denmark earns more of its income from taxing its population than any other developed country.

The tax-to-GDP ratio, the measure used by the ministry in its analysis, is a calculation of the proportion of a country’s gross domestic product (GDP) that comes from tax collection.

After increasing for ten consecutive years from 2003-2013, the measure is now beginning to decrease, due to tax reforms implemented by both the previous Social Democrat-led government as well as under current PM Lars Løkke Rasmussen’s leadership, Børsen writes.

The ministry said it expects a further 0.4 percent reduction in the measure by 2025.

“As minister for tax I am pleased to see that we are fulfilling the promises made when we formed the government to reduce structural tax rates. When we reduce taxes and fees we are helping to make Denmark more competitive for foreign investment,” Lauritzen said.

The minister added that he hoped Denmark would continue to reduce demands on tax payers, citing Sweden as a country that could be looked to for finding an optimal level.

Sweden is set to reduce corporate tax to 20.6 percent in August, while Denmark taxes businesses at 22 percent, although Copenhagen currently has no plans to reduce corporate tax.

Lauritzen said that lower corporate tax rates in other countries were coupled with wider-ranging overall taxes, so the effective tax rate was not lower.

“So that is not putting pressure on Denmark, but if overall corporate tax began to fall [in other countries], that would be something we would have to look at,” he said to Børsen.

Mads Lundby Hansen, head economist with liberal thinktank Cepos, told Børsen that he saw the news as positive, but that Denmark’s taxes were still high overall.

“Whether we are number one or number two is not that relevant as such. The point is that we are amongst the countries in the world with the very highest taxes, and that means we miss out on growth because businesses and citizens invest and work less [in Denmark],” he said.

Lundby added that Denmark could soon find itself back on top of the EU tax pile.

“France and President Macron are planning a nine percent reduction in corporate tax by 2022, and he has also proposed other tax reductions. So we can easily end up in first place again,” the economist said.

READ ALSO: Denmark still has world's highest taxes: report


Danish customers face VAT charges on all non-EU purchases

All goods bought outside the EU will be subject to Value Added Tax in Denmark from July 1st.

Danish customers face VAT charges on all non-EU purchases
Packages in process at a Danish depot. Photo:Mads Claus Rasmussen/Ritzau Scanpix

A decision by the EU to scrap an exemption for low-value items mean that all purchases outside the bloc will now have VAT (moms in Danish) applied.

Under current rules, purchases of under 80 kroner (10 euros) do not qualify for VAT on import to Denmark, but that will no longer apply from July.

This means that anything purchased from, for example, China, the United States or United Kingdom on websites like Amazon and EBay will have VAT added to the price, no matter how small.

The Danish Customs Agency (Toldstyrelsen) said it was working to increase awareness of the incoming change amongst Danish consumers.

A recent YouGov survey, conducted on the agency’s behalf, found that 79 percent of 750 people were unaware of the impending extra VAT charges.

That proportion would correspond to over three million consumers across the entire population.

“It’s a real shame to be left with an extra bill if you think you’ve got a bargain. We want to help consumers avoid this,” said Annette Hove Nielsen, a section leader with the Danish Customs Agency responsible for customs checks on incoming packages at Copenhagen Airport.

Nielsen also directed consumers to the agency’s information page undgå

Foreign residents in Denmark, particularly those from non-EU countries (including the UK since the beginning of 2021) may be more likely to have experienced VAT charges on parcels sent from abroad.

But those charges have previously only been applied in items worth over 80 kroner.

Goods purchased outside of the EU are subject to VAT at 25 percent of the purchase price. Postage and shipping charges are also generally applicable.

READ ALSO: How does income tax in Denmark compare to the rest of the Nordics?