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Does Denmark really have the highest tax in the world?

Emma Firth
Emma Firth - [email protected]
Does Denmark really have the highest tax in the world?
The Tax Agency in Copenhagen. The most recent OECD report listed Denmark as the highest tax country followed by France, Belgium, Italy and Sweden. Some economists in Denmark disagree with the ranking. Photo: Niels Christian Vilmann/Ritzau Scanpix

Denmark is known for having having high income tax but is it really the highest tax in the world?


It is well known that Denmark is a country of high taxes but during the election last year, several politicians complained that Denmark's tax was the highest in the world.

"We are the world's most heavily taxed country", said Liberal's (Venstre) party leader, Jakob Ellemann-Jensen, during a debate between prime ministerial candidates on DR in October 2022.


Then-leader of the Nye Borgerlige party, Pernille Vermund, made a similar point on Twitter, writing "we live in a country with the world's highest tax burden", in a post about failures in nursing homes.

More recently, the libertarian opposition party Liberal Alliance has also pushed the line that taxpayers are subject to a higher rate in Denmark than in any other country.

Politicians and parties making this assertion typically refer to the fact that the OECD (Organisation for Economic Co-operation and Development) has listed Denmark as the highest tax country for several years.

The most recent OECD report listed Denmark as top, followed by France, Belgium, Italy and Sweden.

But some economists disagree with the way tax is assessed in these world rankings, which makes Denmark's tax system appear more extreme than it is.

How much do people in Denmark pay in tax?

A salary in Denmark will include the following deductions: Labour market tax (AM-bidrag 8%), State tax (bundskat 12%), Municipality tax (kommuneskat 25%), State pension contribution (ATP-bidrag 94.65 kroner).

If you have an income of 45,500 kroner per month (which is the average salary in Denmark, according to Statistics Denmark), that means around 45.1 percent will be taxed, and 94.65 will go towards the state pension, giving you a total of 24,884.85 kroner per month (3,340 euros per month) after deductions. 

Various tax deductions can result in this amount being reduced.

READ MORE: What salary can you expect to earn in Denmark?

Why is Denmark so high in the world rankings?

Analysis from Denmark's economic-political thinktank Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd, AE) shows that some key factors are missing in the OECD calculations of countries' tax burdens.

"The tax burden is the amount of personal income a typical person is meant to hand over to a government and the total income in society administered by the government," AE's chief analyst Jon Nielsen told The Local.

"The OECD calculates the tax-to-GDP ratio but that is not a good reflection of the tax burden for two main reasons.

"Firstly, the calculations include taxes on social benefits. Tax collected on social benefits is not income that shifts from the hands of citizens to government, it is income shifted from one area of government to another.


"In 1994, public pensions became taxed, so the tax-to-GDP ratio rose without the government getting higher revenue, or citizens getting lower disposable income, because benefits were set up to compensate people. So if you compare countries where social benefits are fully or partly taxed, we need a correction to make the comparison accurate," Nielsen said.

This situation was noted by Statistics Denmark in its report 'Taxes and Charges' 2022.

"The second correction needed is that we should be using gross domestic income (GDI) to compare countries and not gross domestic product (GDP). GDP measures how much value is created within Denmark's borders but a lot of Danish income now comes from abroad," Nielsen told The Local.

"During the last thirty years, globalisation has set in and more income has come from assets abroad, for example through pension funds. If you include that income, the Danish tax burden is reduced," Nielsen said.

If you take those factors into account, Denmark drops to fifth place among the OECD countries, an AE analysis concluded.

"The myth that we the have the highest taxes in the world makes people think of Denmark as somewhere exclusively highly taxed and an international exception, but we are not. We are in the higher ranks of course but there is nothing special about Denmark and high taxes," Nielsen told The Local.


Is Denmark's tax too high?

Politicians who favour lower taxes in Denmark might argue that the analysis by AE doesn't change anything. 

"I have no doubt that there is more than one way to calculate the tax burden. But even if you use AE's figures, it does not change the fact that the tax burden is very high in Denmark. Fifth place is also high," the Conservative mayor of Lyngby-Taarbæk municipality, Sofia Osmani, told newspaper Politiken in October 2022.

AE's chief analyst Nielsen argued that Denmark's tax system is what provides an equal society.

"You can't say that countries with high taxes are more expensive to live in. The fact that healthcare, childcare and education are financed by the tax system, means that the personal amount you have to spend on those items is less than in other countries," Nielsen said to The Local.

"Denmark's taxes are one of the reasons we have such an equal and highly productive society, where the general education level is high, the infrastructure works well and spending on research and development is high. The fact that we have high taxes is a key reason why our welfare system produces these equal and fair opportunities for all," Nielsen said.

READ ALSO: How will new Danish government change income tax?


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