The globalization is pushing high-cost countries hard. To compete with countries like China, India and Brazil for example, is becoming increasingly difficult. Developing countries have developed very rapidly and may with both the education, skills and low costs compete with the most developed countries.
Germany has announced that taxes will be reduced by 225 billion SEK starting in January 2010, and in 2011 there will be further tax cuts.
Now, Denmark has announced that Danish labor taxes should be reduced by more than 30 billion DKK (approximately 4 billion Euro) since globalization affects the Danish tax system. As in Germany, Denmark will start this alignment in January 2010.
Just over a year ago, a tax commission of the civil government was appointed in Denmark. The mandate of the tax commission was proposing a new tax system which helps to solve many of the challenges the Danish welfare state is facing. Also, make recommendations leading to new jobs and that welfare can be maintained.
As a result of the tax proposal from the Commission, the labor-taxes are now reduced significantly in Denmark. Raising taxes to save welfare was never an option.
The highest marginal tax rate will be lowered from 63 percent to 56 percent, which includes Danish social contributions. This means that the highest marginal tax in 2010 will be 51.5 percent. The reduction in the Danish marginal tax is the largest ever carried out.
In total, the tax reform is estimated to increase labor supply by 24.000 full-time positions.
Cecilia Helland