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What does Denmark spend its tax revenues on?

A new analysis breaks down the areas on which Denmark primarily spends public funds.

What does Denmark spend its tax revenues on?
Denmark got through over a trillion kroner of public spending in 2021. Illustration photo: Kristian Djurhuus/Ritzau Scanpix

National agency Statistics Denmark (DST) published on Wednesday a new analysis in which it categorises broad areas of public spending in 2021.

The state spent a total of 1.272 trillion kroner in 2021. In its analysis, DST treats this dizzying amount as if it is a 1,000-krone note and sets out how much as a proportion of this total is spent on various areas of society.

The 10 different categories follow EU agency Eurostat’s Classification of the Functions of Government (COFOG).

An additional breakdown of the ten main categories can be viewed on DST’s website.

If public spending in 2021 is taken to be a theoretical 1,000 kroner, almost half – 416 kroner – was spent on the category “Social Protection”.

“More than 40 percent of the state budget in 2021 went to social protection. More than one third of this was spent on elderly care, which includes things like the state pension,” DST official Louise Mathilde Justesen said.

This category also includes costly areas of public welfare spending such as statutory sick pay, contributions to childcare facilities like municipal preschools, and parental leave.

Second after social protection in terms of its proportion of state spending is the public health system. This takes 182 kroner from the model 1,000 kroner, an increase from 167 kroner in an earlier analysis of spending in 2020.

“This increase should be seen in respect of the testing and vaccination programmes in relation to Covid-19. In 2021, [rapid] antigen tests were used a lot and vaccination was offered to all members of the public,” Justesen said.

Of the 182 kroner spent on the health service, 126 went to hospital services, making hospitals the largest component of health spending by some distance and the second-largest sub category overall, behind elderly care.

The next two largest categories, both of which received 119 of the theoretical 1,000 kroner, are ‘Education’ and ‘General Public Services’.

In the former of these two categories, public elementary schools got 55 kroner while further and higher education each cost 29 kroner.

‘General Public Service’ encompasses a broad range of public activities. These include tax authorities, public research at universities and foreign development aid.

The next largest category – 80 kroner out of the 1,000-krone note – is titled ‘Financial Matters’.

“In 2019, 62 kroner of the 1,000 went on this post. Covid-19 has also had an effect on costs here,” Justesen said.

Compensation to businesses which lost income due to the pandemic and resulting lockdowns and other restrictions form part of this category, she explained.

Spending on this area in 2021 was however lower than in 2020, when it comprised a 93-krone share of the 1,000, equivalent to just under 10 percent.

Other categories that cost the state under 100 kroner in every 1,000 kroner spent include ‘Leisure, Culture and Religion’ (32 kroner), the military (24 kroner), ‘Public Order and Security’ (19 kroner), environmental protection (7 kroner) and ‘Housing and Public Facilities’ (2 kroner).

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For members


How much will electricity tax cut save bill payers in Denmark?

Denmark is to reduce electricity tax to almost zero, in one of a number of measures announced on Friday to help households cope with soaring costs. How much do bill payers stand to save, and is the tax cut a good solution for the predicament?

How much will electricity tax cut save bill payers in Denmark?

A broad majority in the Danish parliament has agreed a new package of cost-saving measures for homes this winter, including sunk electricity taxes and increased family welfare.

Parliament has agreed the new measures to provide additional help to people, particularly families, who are struggling with energy costs.

A core component of the package includes lowering the electricity tax from 69.7 øre per kilowatt-hour to 0.8 øre – equivalent to the minimum rate permitted by the EU – for the first six months of 2023. An øre, literally translating to ‘ear,’ is a kroner-cent. 

This measure alone is estimated to cost the Danish state 3.5 billion kroner, while the total cost of the package to the government is around five billion kroner. The deal could be officially adopted by parliament as early as next week.

READ ALSO: Denmark announces new winter aid package for households

The decision is the latest in a number of measures taken by the Danish government in response to record energy prices.

As a result of supply stoppages for Russian gas, on top of inflation, energy prices in Denmark are at record levels, with high costs set to persist throughout the winter.

“Danes are hit hard by inflation. That can already be felt now. We can look ahead to a winter when it will be even more prominent,” Finance Minister Nicolai Wammen said at a press briefing on Friday at which the new package was presented.

“It’s important that we don’t provoke further inflation but we must also help Danes and keep Denmark on the right track. That is what we are doing with this agreement,” he said.

The cut to electricity taxes could save individual households between 1,000 and 2,000 kroner on their bills, according to an expert who spoke to Danish news wire Ritzau.

READ ALSO: How much will Danish energy bills go up this winter?

Despite this, the decision to cut energy tax may not prove to be the best fix for the issue, he said.

“With these initiatives a household will be able to spare between 1,000 and 2,000 kroner on their electricity bill,” Brian Vad Mathiesen, professor in energy planning at Aalborg University, told Ritzau.

“I think it would have been better to send a cheque to all households with a set amount and then keep the electricity tax,” he said.

The government has previously sent one-off payments to selected households in response to the energy crisis. In August, around 400,000 homes in Denmark received 6,000 kroner towards gas bills. To receive the money, the homes had to be primarily gas heated and under a specified total income level, among other criteria.

READ ALSO: Denmark’s state auditor to review potential errors in energy relief payments

But the government has said it wants to limit relief in the form of lump sums because this risks worsening inflation.

Mathiesen said that cutting the electricity tax could have the unwanted effect of removing the incentive for homes to save on electricity use.

More efficient use of energy is the most important tool in the current climate of extremely high energy prices, he said.

“What you risk is that people will take their foot off the brake on energy consumption and that could be harmful in relation to price setting – we could actually experience higher prices than expected,” he said.

The energy planning expert called for more government initiatives that would encourage the Danish public to restrict its energy consumption.

“I also note that there are some long-term initiatives to switch back to district heating [from individual gas heaters, thereby reducing gas consumption for heating, ed.]. I hope that there will be more of these savings initiatives. Both for households and businesses, because that is something that can reduce inflation,” he said.

READ ALSO: EXPLAINED: When should I turn on my heating in Denmark this year?