Country Rankings - Denmark
Jul 11, 2018 Denmark: fragmentsHere's a conundrum: How do you go about BEPSifying the entire global network of double tax avoidance treaties – or the majority of them at least – without testing out the theory that time is infinite? You use an instrument of course! By which I don't mean you rewrite the world's tax treaties using the power of song. This is the OECD's BEPS Multilateral Instrument, which is considerably less entertaining. But more effective. Probably. Given that the MLI went into effect on July 1, it's too early to tell how the changes to be brought about will work in practice. But while it's likely to shorten the global treaty reform process by several years, the process isn't going to be an easy one by any stretch of the imagination. Here's the thing about the MLI: it's not a one size fits all solution. It's more like 40 sizes fits a few thousand. And the danger of having so many sartorial options to choose from is that you'd never leave the house. How, therefore, are taxpayers doing business across multiple jurisdictions expected to cope with this vast and ever-changing wardrobe of treaty positions, covered agreements, and optional arrangements? The answer is actually quite simple. Get a computer to work it all out for you. Indeed, the OECD is already developing an MLI matching database to help taxpayers navigate this complex matrix of signatories' MLI positions. Thank goodness for that! But hold on just a minute. Don't get your hopes up too high that this system will solve all the problems. For starters, it's still in beta mode. And, as the OECD itself cautions, it can only provide "projections" of treaty changes in cases where a signatory has yet to ratify the instrument. But, even when a country has completed its ratification procedures, it is permitted to change its MLI positions at any time. Let's hope somebody remembers to tell the computer when the changes do occur, then. A lot has been said and written about how BEPS changes at jurisdictional level are making life difficult for multinational entities, especially with regards to transfer pricing and audits. But perhaps the impact of the MLI, which will help change the very legal fabric of international commerce, has been somewhat overlooked. Here's another question for you: How do you go about increasing a tax authority's efficiency? Why, you split it into seven, of course! At least, that's what Denmark has done. And considering the Danes can do no wrong in many people's eyes, and that, as I wrote here recently, the traditionally monolithic super-authorities elsewhere aren't exactly covering themselves in glory at the moment, who are we to argue? It will be interesting to see how this goes. For me, it feels like there's going to be too many bureaucratic edges on show. Too many administrative gaps for taxpayer issues to fall into and disappear without trace. Will all these separate entities, with their narrow remits, talk to each other? Will they be allowed to? Will they actually want to? It was a dream project perhaps for someone whose job it is to re-organize organizations. But will these reforms turn out to be a nightmare for taxpayers? Time will tell. Perhaps I'm going to be proved completely wrong. But "liaison" seems to be the key word here.
Jun 22, 2018 Denmark: burdensomeYes, in a world of much uncertainty, it's nice sometimes to hear something familiar. Denmark's tax burden, for instance, is still massive, even though reducing it is one of the Government's top priorities, according to the Tax Minister. That Denmark needs an entire ministry dedicated to taxation tells us something about the size of the tax system! Another rule that continues to hold firm is that nobody listens to the International Monetary Fund. Unless, as a country, it's lending you much-needed cash, that is. But even then, it's fiscal recommendations are usually put in place somewhat begrudgingly. The IMF complains about the high level of taxation on labor until it's blue in the face, but it's obviously wasting its breath. Just look at the European Union's latest Tax Trends report. Labor taxes continue to account for a shade under 50 percent of total tax revenues in the EU, Iceland, and Norway. But maybe it's time countries took the IMF's conclusions a bit more seriously. After all, remember that at some point in the future, humans will be a rare sight in the work place, if predictions about automated economies and societies bear out. Robots and algorithms don't tend to earn taxable wages like humans do. So where's the tax revenue going to come from then? Ha, governments! Not so smart now, are you!?
Jun 11, 2018 Denmark: caringThe European Union might be falling apart at the seams, but, despite events in Italy, Spain, the United Kingdom, and Greece, legislative life has continued within the European Commission's HQ in Brussels in a reassuringly repetitive way. In fact, it's been a particularly busy time for tax reforms in the EU. There can have been few EU tax proposals that have met such a frosty response than the Commission's interim digital tax. And after this project was effectively torpedoed last week by the usually cooperative and moderate Nordic countries, this must surely be dead in the water. Further, fundamental changes to the architecture of the EU VAT regime are also in doubt after EU finance ministers failed to agree on three items at their meeting late last month. In addition, a schism has emerged over the EU's flagship corporate tax reforms, the CCCTB, and also over the issue of a minimum corporate tax rate, which stands little chance of approval if unanimity in the Council continues to be a requirement. These big-ticket harmonizing measures are of greater symbolic significance, since they are intended to represent an EU increasingly pulling together in one direction. Instead, the Union appears to be a far from harmonious place, which isn't helpful for multinational taxpayers and investors wondering which direction the bloc's headed next. The normally altruistic Denmark has at least partly atoned for its mutinous act this week by boosting its sharing and caring credentials – well, its sharing credentials, at least. It's one of the few countries in the world that has decided to provide a measure of tax relief to those participating in the increasingly significant sharing economy.While it's a fairly minor development in global terms, it's worthy of mention here because, normally, all we hear in relation to the sharingeconomy, or the gig economy as it's otherwise known, is fire and brimstone from authorities to anyone who doesn't report sharing-economy income on their tax return, whether that be a few dollars or a few thousand. That more and more tax authorities have at least made pronouncements about sharing economy tax issues over the last couple of years or so is a positive thing, as there was something of a desert in terms of tax guidance. However, what's unhelpful from tax agencies is vague guidance, as has been seen from many a territory so far. In particular, guidance up to now has been vague as to when a person earning some money via sharing economy platforms is carrying on a trade for tax purposes. So, Denmark's step to allow taxpayers to receive a certain amount of income tax-free is a small but symbolic step in the right direction, perhaps.
Jan 16, 2018 Denmark: climb-downHowever, more recent developments have highlighted the limitations of coalitions, especially when the parties involved are on different political pages. Denmark's Prime Minister, Lars Lokke Rasmusen, for example, was forced into an embarrassing climb-down last week on tax after a coalition partner decided not to play ball. And in Germany, after September's inconclusive election, and months of fruitless coalition talks, lawmakers look set to unveil an utterly underwhelming grand coalition agreement as far as tax reform is concerned, which likely speaks of the CDU's fiscal conservatism rubbing up against the SPD's urge to splurge the surplus.
Oct 25, 2017 Denmark: assistsUltimately, perhaps small businesses need more help. Tighter definitions might be start. Indeed, this references small companies, small firms, small businesses, SMEs, the self-employed, and individuals in businesses, being terms often used interchangeably, but in terms of tax outcomes, they can be miles apart in many jurisdictions, and governments are often guilty of blurring the lines too. Indeed, as Congress prepares to draft new tax laws to provide substantial tax cuts for many small businesses, agreeing what a small business is when developing policy could be a major stumbling block in the push towards tax reform. However, instead of waiting for small businesses – however we chose to define them – to fall down legal rabbit warrens, perhaps governments and tax authorities could be more proactive. Denmark, for instance, where almost 50 percent of SMEs make unintended errors in their tax filings, is launching a project to allow small businesses to have their tax returns vetted for mistakes before submission. This, in theory, is intended to provide a double dividend, reducing the chances that small firms will face long and costly tax audits, and freeing up tax authority resources to pursue actual tax evaders. No doubt, taxpayers in other parts of the world are hoping this is an idea that will catch on. Some governments, thirsty for revenue, might hope otherwise. Either way, Denmark can always be relied upon to spark a lively discussion about tax.
Sep 06, 2017 Denmark: hyggeDenmark is a benchmark country. It is the archetype of a high-tax, high-spend northern European economy. So, when politicians in various parts of the world debate fiscal policy, they sometimes ask the electorate if they would rather live in a country like Denmark in preference to their own i.e. would they be prepared to put up with high taxes in return for a welfare state in which nobody is left behind economically. Indeed, the small Scandinavian nation, barely twice the size of Massachusetts, became an unexpected focal point in the last election campaign, and was held up by Democratic candidate Bernie Sanders as a model of social democracy. Those on the right tend to argue of course that prosperity and individual liberty go hand-in-hand with low taxes and a small government. Singapore, for example, would be much closer to their ideal of a classically liberal economy than Denmark. However, as is usually the case in life, the answers aren't clear cut. Both countries (although Singapore is more akin to a city-state than a country), with their divergent economic models, are rich: Denmark's GDP per capita is well above the EU average; Singapore's is the best in Asia, and one of the highest in the world (although there is a separate debate to be had about how extensively that wealth is spread among the populace). And, arguably, overall, the inhabitants of each place are happy: Singapore is frequently rated as one of the safest cities in the world in which to live; Denmark is famous for its contented, laid back approach to life, and they even have a word for it – hygge. What's more – and serving to emphasize that we are living through strange, unpredictable times – recent tax developments in Denmark and Singapore should give politicians pause for thought when debating the merits of Singaporean dynamism and Danish hygge. For while the Danish Government is keen to cut taxes, Singapore is raising its level of taxation, largely to fund more comprehensive public services. What this shows us, perhaps, is that no system is ever going to be perfect, and that change, both incremental and revolutionary, including in tax policy, is permanent. For its part, the Danish Government is aware that high marginal tax rates, combined with a generous welfare state, is a disincentive to work. Conversely, Singapore appears to have come to the realization that its low-tax, low-spend paradigm cannot generate the revenues needed for high-quality education, health services, and infrastructure. Ultimately, perhaps the question should be not how much a government can raise in tax, but how well it spends it. I have never lived in Denmark, but I must admit that the prospect of seeing over half my income taken in tax, and my alcohol consumption drastically reduced due to eye-wateringly high prices (mainly due to tax) is not an attractive one. But then, by all accounts, given what they get back in return – in a word, Hygge – the Danes wouldn't have it any other way. So good luck to the Government if it can cut tax without also reducing rates of happiness. Similarly, it will be interesting to see if Singapore can maintain its position as one of the world's premier business and investment hubs, while asking those who run the businesses to pay more tax.
Oct 31, 2016 Denmark: surprisingGlobal competitive rankings, like the latest Doing Business Index from the World Bank, often throw up some surprising results. New Zealand usually performs well in such surveys, but who'd have thought that it is literally the best place in the world to set up and run a company from a regulatory, administrative, and tax point of view – better even than low-tax Singapore, according to Doing Business 2017? Or, perhaps even more startling, that Denmark – yes, high-tax, high-spend Denmark – the object of derision from the right and praise from the left, during the US presidential election campaign, is the fourth best place to operate a firm, exceeding laissez-faire Hong Kong as a business location? Similarly, Sweden's brand of social democracy is often criticized as overbearing and fiscally unsustainable. Yet, Sweden is just behind the United States in ninth place. If these results seem scarcely credible, it is probably because we are looking at them through a tax-focussed lens. And Doing Business shows there are a whole host of other considerations that go into the mix when investors decide where to set up a business. New Zealand's top score is attributable to several non-tax factors, including simple company formation and property registration procedures, hassle-free construction permit processes, strong minority investor protections, and the ease with which credit can be obtained. Sweden also scores quite highly in most of these categories, excelling particularly in the "getting electricity" segment of the index. It doesn't fair as well when it comes to getting credit or paying taxes though. The opposite also holds true; there are countries you'd think would be occupying the top spots in the league table but are only fair-to-middling, like Switzerland. Doing Business tells us that Switzerland's taxes are not overly difficult to comply with, but it's not a great place to start a business in a hurry, or to get credit. Dealing with construction permits is also difficult, and protecting minority shareholders virtually impossible. On the other hand, some of the findings are not so surprising for those who follow international tax developments. For instance, it doesn't come as a huge shock to find France down in 29th place. But, given the index includes 190 jurisdictions, this still isn't a disastrous score. And I'm sure the fact that France finished ahead of Switzerland in the table – two countries with something of tense relationship around tax and banking secrecy rules, as illustrated by the French tax authority's recent request for an unusually large amount of data from UBS – wasn't entirely lost on the French Government. Indeed, we are living in an era where the normal order of things is being shaken up on a regular basis. Think Brexit, Trump versus Clinton, and, perhaps the most unexpected event of all, India passing GST. We can now add to that list Wallonia's entrance onto the world diplomatic stage.
Nov 24, 2015 Denmark: competitiveThere's nothing rotten in the state of Denmark according to Bernie Sanders, the Democrat long-shot for the 2016 presidential race, who views the Scandinavian country as the sort of socialist utopia that the United States should be aping. His view has sparked one of the most unlikely US political debates of recent times. Naturally, most Republicans think Denmark is just the sort of high-tax, high-welfare, peace-and-love Nordic state that is the very antithesis of the American Way. But, in fact, both they and he are wrong; as is so often the case in such polarized debates, the truth lies somewhere in the middle. Yes, Denmark does spend generously on social programs (total public expenditure was 57 percent of GDP in 2014) and individual tax also exceeds 50 percent in certain circumstances, but it's also one of the most business-friendly countries in world. Its business tax regime is more competitive that America's, certainly. In fact, according to PwC's newly published Paying Taxes Index, it could be said that it's a more business-friendly than the US in general. According to this, Denmark's total tax rate (consisting of corporate, labor, and other taxes) on an average-sized manufacturing firm is 24.5 percent. In the United States it's 43.9 percent. In Denmark it takes 130 hours each year to comply with taxation. In the US it takes 175 hours. Hence, Denmark is in 12th place in the index, and is second among EU countries. The US is 53rd. The World Bank rates Denmark the third-best place in the world to do business, with only Singapore and New Zealand rating better. Here the US is a more creditable 7th, but you get my gist.
Apr 18, 2013 Denmark: mistreat ChinaOne country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
Oct 11, 2012 Denmark: Denmark has an attack of the BrusselsWhat has happened to Denmark? It used to be one of the bulwarks against assorted Brussels madnesses, but has turned left, and now, horror of horrors, one of its ruling left-wing coalition partners has thrown its lot in with the Tobin brigade, coming out in support of an FTT. But that's only one coalition partner, and Denmark wasn't included among the eleven member states which lined up later in the week in geometrical hari-kiri formation behind Algirdas Semeta. He's a Bad Thing, but he's not a country, so I can't give him an Execration, more's the pity. That's what you get if you put academics in charge of the real world.