The tax structure
The development of the tax structure in Denmark from 1983 to 2017
|Allocation of total taxes of approximately 954 billion DKK in 2017|
Progressive income taxes to the government have decreased over the past 10-20 years while the tax basis has widened and labour market contributions and green taxes on environmentally harmful consumption have become more important. This is shown in table 1 where the total taxes for the period 1983 to 2017 are shown according to types of tax.
The share of the total taxes from 1983 to 2006 going to income tax has more than halved from around 24% to below 12%. In the meantime, contributions to the labour market fund have increased and they make up around 10%.
The Local Government Reform and the Financing Reform in effect per 1 January 2007 had some implications for the distribution of income taxes between the municipalities and the government. Most importantly, the number of taxation levels were reduced from three to two as the new regions, as opposed to the counties, cannot impose taxes. As per 1 January 2007 municipalities took over the share of the county revenue that did not correspond to the new state health contribution of 8%. As a part of the financing reform the tax on persons with limited tax liability was transferred fully to government. This increase in income tax to government and the corresponding decrease in income tax to municipality, county and church from 2006 to 2007 happened as a consequence of these initiatives.
Due to income tax reductions following the tax reform Forårspakke 2.0 and the 2012 tax reform, income tax to government as a share of personal taxes falls with approximately 3-4 percentage points after 2010.
The notable rise in the income tax to government in 2015 is caused by extraordinary revenues from the tax on endowment pensions this year because of the tax rebate given when pensions were converted from endowment pensions to the age pension plan.
|Table 1. Development in the tax structure in Denmark 1983 - 2017 (selected years)|
|Income tax to government||24.6||23.9||24.8||19.9||15.5||13.6||12.7||12.5||20.5||21.5||17.2||17.1||21.1||18.6||18.9|
|Income tax to municipality, church and county (-2006)||28.6||25.0||28.6||29.2||29.2||29.5||30.6||28.4||21.4||22.7||23.6||23.4||23.1||24.2||24.7|
|Labour market contribution||0.0||0.0||0.0||5.6||9.0||9.1||9.5||9.1||9.5||10.2||9.9||9.4||9.1||9.6||9.9|
|Property taxes, property value tax2)||2.3||2.0||2.5||2.3||2.1||2.1||4.0||3.8||3.8||4.5||4.5||4.3||4.4||4.4||4.4|
|Real interest tax/pension returns tax||0.0||2.7||4.2||3.8||2.9||2.1||0.2||1.6||0.6||1.1||4.5||5.0||2.4||2.7||1.1|
|VAT and payroll tax||21.8||20.0||20.8||20.6||20.5||20.4||20.8||21.8||22.1||22.1||21.8||21.5||20.6||21.5||22.2|
|Other taxes on goods and services||7.4||6.8||4.1||3.8||3.4||4.4||3.4||2.8||3.1||2.2||2.1||2.5||2.4||2.5||2.3|
|Other taxes and duties3)||3.3||2.7||2.9||2.2||2.1||2.3||2.3||2.1||2.3||2.4||2.3||2.4||3.2||2.3||2.3|
|Total taxes and duties, DKK billion||230.0||328.7||424.7||464.8||537.8||563.0||642.3||784.3||810.0||777.4||818.7||870.9||956.3||946.8||954.4|
Source: Statistics Denmark, the Danish Ministry of Finance, December 2016, and own calculations.
Note: The figures from 2000 and onwards are based on Statistics Denmark's figures from the new revised national accounts.
1) ATP (the labour market supplementary pension scheme), unemployment insurance funds etc. From 1999 the figures include contributions to early retirement schemes.
2) The years before and after 2000 are not comparable. The figures exclude taxes on rental value from 1983-1999 but include property value tax from 2000.
3) Capital tax, inheritance tax and gift duties, fees etc.
Since the start of the 1990s, VAT and duties have accounted for around 30-35% of the total.
The proceeds of the real interest tax, which was replaced by the tax on pension returns in 2000, tend to be highly volatile as they are linked to financial market developments and the fluctuations in the shares of the pension funds.
The proportion of business taxes has been increasing since the start of the 1990s, and peaked for the present in 2006 and 2007.