No, it isn't. The total tax wedge under OECD definitions, which includes employer payroll taxes, the Danish income tax burden is on average around 38%. Excluding employers payroll taxes it's around 36%.
For comparison, the "all in" number for the US is around 31%.
The OECD average is 36%.
The only OECD country that crosses the 50% mark is Belgium, which consistently is one of the highest tax countries in the world.
You can find this data here [1], and while the publisher isn't exactly neutral, the source for all the data is an OECD publication which is also freely available (I don't have the link handy). The OECD report has far more detail
[1] http://taxfoundation.org/article/comparison-tax-burden-labor...
But there are two specific main arguments for presenting the data this way:
All prices in most countries that has VAT or GST or equivalent tends to be given tax inclusive. E.g. in most of Europe, a consumer can legally demand to pay the stated price if a price is advertised directed at consumers even if it is not specified that the price was meant to be VAT exclusive, or in some countries even if it is explicitly stated that the price is VAT exclusive.
So the first answer: Because when we otherwise compare price levels we compare the sticker price. If we otherwise treat the VAT separate from the goods, then that makes no sense. It's part of the complexity of trying to compare cost-of-living.
The other reason is that while the tax wedge on income is relatively stable across large parts of the population, VAT varies massively from person to person on the same income. A tax wedge excluding VAT tells us a lot about what proportion large swathes of the population will be taxed, and can't avoid paying.
But for VAT, a large proportion of it comes down to personal consumption choices.
To illustrate, let's assume 30% income tax (and lets forget about payroll taxes). This person has 70% left. Now, if I were to pay 10 percentage points of the gross to rent somewhere small, I have 60% left to spend. If I'm not bothered about a pension (stupid, yes), most of that might get towards VAT'able consumption (though some will e.g. be VAT-exempt goods like basic food stuffs). At a 25% VAT rate, that means 15% of my gross salary goes to VAT. If, on the other hand I earn exactly the same, but live in an expensive place that takes 30% of my gross salary, and I pay 10% of my gross towards pensions, I now have only 30% left to spend, and if make the same assumptions about what I buy I'd end up paying 7.5% of my gross in VAT, all through my own choices.
In reality, in the latter case you'd pay even less, as a larger proportion of the remaining cash would go towards exempt/zero-rated products like food (your total tax wedge would also be far lower, as in most countries those pension contributions would result in reduced tax).
1%-5% of the gross towards VAT is relatively typical even in countries with 25% VAT headline VAT rates. For someone with a low salary in a low VAT country it may very well end up being well below 1% (because low salary tends to mean a larger proportion goes to housing and food, leaving less for consumption affected by VAT)
So the second answer is that the VAT part is to a large extend under individual control, and so varies within the same income tax bracket, and so confuses the issue or a lot of the things you'd use the total tax wedge to get an indication of.
That doesn't mean that totals including VAT/GST or equivalent would be wrong/bad/misleading any more than excluding them is. They just show different things, and you need to be aware of different things when trying to use them in comparisons.
A lot of reports on taxation will include a variety of different breakdowns like this to give a fuller picture.
This does complicate cross-border comparisons in that if you're including payroll taxes when talking about the tax, you also need to add them to salaries to get comparable numbers.
Nobody just pays 50 percent. The tax is progressive and there are numerous deductions and special cases. The actual percentage of income paid is closer to 40 for most people. And then there is the mess of indirect taxes. And the details of the tax rules change significantly all the time.
But most of the majority of Danes, which are on some kind of welfare/pension/public education grants (2.2 million out of 4 million voters) and the half of the 1.8 million employed that work for the government, like the current system.
I was in my mid-30s before I had to file a tax return, and that's only because I'd set up a limited company. The Inland Revenue (HMRC) can be nasty, but nowhere near as nasty as the benefits accountants. HMRC website is also rather good and you can calculate and file online.
Edit: The biggest downside to the UK system is there isn't an obvious end of year review, so many people don't look at their taxes. I wonder how many people are overcharged?
End of year: That's your P60 + end of year payslip, isn't it? PAYE overcharging is certainly possible when you change jobs if you lose the P45 or end up on an emergency tax code for some reason, but if you take the 30 seconds to check your payslip every month you're more likely to notice.
What's more messy is the tax credit system. I hear that the way to maximise tax chaos for yourself is to have two self-employed divorced parents alternating custody of a child every month and claiming WFTC.
Edit: Correction, the EU VAT directive actually has its origins before 1992, but still after Denmark already had its own VAT.
You have just described a typical Hacker News reader, who lives in, say, San Francisco, has relatively high income, and pays rent.
The U.S. is unusual among western countries in how little it taxes the middle class.
That's assuming she does not contribute to a 401k, make charitable donations, or take advantage of any other tax incentives.
[1] VAT 20%, employer tax 50%, income tax 14% on the remainder, plus an accountant to understand the law and that makes 63%. Yes, I get I'm supposed to receive benefits from the mandatory insurances, except:
- by design they never apply to the situations I might fall into (unemployment when you're between 2 countries, medical insurance when you travel, retirement going under the poverty levels by the time I'm 60, paraplegic benefit being under 800€ per month for the rest of your life - how are you supposed to live on that?).
- and those taxes don't even succeed at keeping France afloat, because we have a socialist president who's hiring for about $6bn of policemen whose work is just to bust into Muslims' houses. Yeah, unemployment reduced, socialist goal fulfilled. Doesn't sound more social that giving a job to everyone undepending on their race, however.
I'd be ok with 63% retention if it were simple and useful.
Sometimes one can be in odd situation that don't fit well. It's also been my case some years ago when exercising and selling US stock options not considered as such in France (so taxed as salary, ouch...). Just ask them ahead, in my experience they reply and are clear. And I sent them the data with explanation on what I did, so they could correct easily if I misunderstood. Always been fine so far.
Maybe you had worst experience and decided to move elsewhere, but no need to paint a bleaker picture. One can question the level of taxes and how they're used, but the payment itself is simple for most I'd say.
VAT is also not your contribution, it's a client's, you collect it because you can offset it.
So that 63% figure is pure and utter nonsense.
As a software programmer, I receive money from people I sell the software to, pay VAT, pay social charges, pay income tax and I'm left with 37% of the money given by the clients, even though I have a very lean company (no office, no advertising costs in this calculation, no cloud costs, etc). That makes 63% of my revenue taken by the government.
What did you mean with "pure and utter nonsense", apart from not wanting to acknowledge the tax pressure in France because you've never created a company and, therefore, don't know what you are talking about?
How is creating a company "disinginuous because your tax situation is complicated"? What about we make it simple so we can focus on delivering a product for the customers (like, doing our job)?
As said, I don't even mind the 63%, even though it's impoverishing everyone. I mind the paperwork.
Living in two countries in increasingly common situation. Postdocs in Europe are required to move between countries by many grant programs (this is why me and my wife have 4 different residence permits in varied countries). Also we have a 2 years old daughter. Taxes and other bureaucracy are hell for us. And scientists are not particularly rich.
And even if you take into account the price of college, health care and everything, you'll get to about the same amount but the whole point in the US system is that you do NOT have to pay for other people, cause who needs solidarity in a society.
Well it must be an obscenely large amount of money. My wife (a college professor) and I (IT Manager) are nowhere near being able to take advantage of these amazing loopholes. We pay federal tax, state tax and 2 local taxes (one for the village we live in and one for the village where my wife's college is located). Don't forget sales tax on literally every item we purchase. Property tax is a killer as well. Then there are the payments that are deducted from our paychecks to go into Social Security (which we have no guarantee will even exist by the time we retire). We also pay an enormous amount for medical care, fees for our kids public primary school costs, huge amounts for our son's college, etc.
So, we pay a large number of taxes (I didn't even touch on all of them), risk catastrophic financial collapse if we get very ill or badly injured, have to spend obscene amounts of money on education and do NOT have access to whatever loopholes you imagine we have (well, probably someone like Donald Trump does but not normal people, or even slightly better off people).
This is false. Once you account for all the various levels of taxation (federal, state, local), there is no possible way wealthy people have a tax rate around 15%.
If I wanted solidarity then I'd have stayed in my home country. I like the idea that I am free(er) to chase my dreams and suffer the consequences of my actions. More importantly I like the idea that there are other people who think like me in this country.
You need a lot of money before that's an option. By that point, you have enough to be one of those citizen-of-the-world globe-trotting types with vacation homes that double as convenient tax shelters.
That is to say, the American middle class pays quite a bit in taxes. Even the poor working class pay a flat 12.4% in payroll taxes, maybe 7-8% in sales taxes (depending on locality), and varying amounts in service taxes (fees, tolls, etc.). That's assuming they make too little to pay income tax.
You seem to be angrily agreeing with the person you replied to.
Paying money to the government or a private monopolies that are heavily, and often bizarrely, regulated by the government is basically comparable.
Any sense that you "do NOT have to pay for other people" is mostly fictional.
https://en.m.wikipedia.org/wiki/United_States_congressional_...
https://jakubmarian.com/number-of-seats-in-the-national-parl...
If only they had scatter plot!
GST (essentially sales tax) is levied at 15% on all goods and services except for domestic rent and financial services (and one or two rare exceptions that don't apply to the vast majority of cases).
Your income tax rate is figured from a flowchart, it's really simple: https://www.ird.govt.nz/resources/b/f/bf9db1804ba3cfc08a6ebf...
As for tax returns, it's as simple as going online, adding up your interest earned during the year (most banks will do this for you and send it to you) and adding your dividends earned. It's a bit more work if you do any contracting or freelancing, but it's still simple enough that the vast majority of people can do it while drinking a beer or two on a Sunday afternoon.
(all bank accounts in Norway are keyed to a national ID number assigned at birth, and the banks report all interest income and loss (as interest on debt can be subtracted from your taxable income), and your employer(s) reports your income)
There are some exceptions, in cases where you have particularly complex tax matters, but most people don't have to do anything any more.
Perhaps it's a privacy thing?
One of the advantages is that you can check if you're owing money before filing a Personal Tax Summary (they have a tool to check if you'd owe money or be paid money), and you don't have to file for one if you owe money, and as long as it's less than a certain amount ($500?) then they don't care.
Lots of citations needed actually, from what I know of it the Belgian tax system sounds pretty similar to the Danish one for employees (most taxes are held directly on salary, there's a year-end tally for deductions and the like if necessary), tax rate is ~40% of income.
Danish tax is simple and all inclusive. It is around 50%, which is about the same as in US if all hidden obligatory payments are taken into account. But it is all inclusive: all education and healthcare is free in Denmark, and social security grid is immense.
I am a pro-free-market person and Ayn Rand admirer. But even I think that Danish system is not that bad: you just pay 50% of your income to the government immediately, and they do not bother you until the next time. On the other hand, in the US, the IRS will pursuit you relentlessly, there are insane friction multipliers like healthcare insurance rising costs spiral, and everything is so complicated that only lawyers are happy about it.
Free markets only work if the government is separated from the economy. If they are entangled, you are getting the worst of both worlds.