The Danish tax system has a reputation for being one of the most complicated in the world. The reason for this is that it is what is called a progressive tax system. The fact that a tax system is progressive means that the more you earn, the more you pay in taxes.
There are both advantages and disadvantages to having a progressive tax system, because it can easily become very heavy and complicated. Conversely, it is a really good way to redistribute the goods in society and in this way to smooth the inequality.
There are all kinds of taxes today on all sorts of things, but the source that brings the most to the Treasury is the tax on work, in other words, the personal income tax.
The personal income tax consists of 4 different taxes:
- Labor market
- Bottom tax ( 12.16% of your personal income after a personal deduction of $ 46,200 in 2019)
- Top Tax (15% of all personal income over 522,200 in 2019)
- Municipal tax (Varies from municipality to municipality. The average municipal tax is 24.93% in 2019)
In addition, the church tax varies from municipality to municipality, but the national average is 0.88%. The church tax is voluntary and can easily be canceled if you wish. Read more about church tax and calculate how much you pay for the Danish national church
at church tax calculator.
What is the municipal tax used for?
Of course, the municipal tax is levied to cover the municipalities’ expenses, while the bottom / top tax goes to the state’s.
But what expenses does the municipality actually have?
Some of the biggest expenses the municipalities across the country have are:
- Elderly care and care
- Primary Schools
- Co-financing of health care
- Early retirement
- Winter service (Clearing snow and salting)
Read the entire list of municipalities’ expenses right here.