copenhagen: tax reform?

Posted on March 22, 2006

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by sabine behrmann

Danish taxes are said to be the highest in the world, ruining the country’s competitiveness.

No wonder, companies and certain politicians have been calling for a revision of the Danish tax system for decades. One of the subjects that has been discussed quite heatedly over the last couple of years has been a flat income tax with everybody paying the same percentage of their income. Just like the VAT this hits people with low incomes the hardest, which is why Danes in general are opposed to the idea. The general conviction being that the strongest shoulders should carry the heaviest burdens.

So what do politicians do who are eager to change a system that their electorate approves of? They instigate a reform somewhere else. Something dealing with the administration. Something that promises greater efficiency, better service, quicker responses.

In the case of taxation the Danish solution had three aspects: a merger of the national and municipal tax offices into one inland revenue would pool the combined expertise and therefore strengthen service and response time. A new computer system would lead to greater efficiency. On top of this the individual employee’s results are now measured by a system that assigns a certain amount of points to every finished task. In order to fulfil the management’s expectations concerning productivity every employee has to score a certain amount of points. It may not come as a surprise that easy tasks gain them points easier than the difficult ones.

This system has been operational since November 1, 2005, and it has already lost the Danish government about 1 billion kroner (about 134 million €) in arrears that have been left uncharged.

Since the new computer system is slow and the employees have a hard time to get an overview over the business routines the backlog is growing steadily. Mail received in early January is in the process of being answered now. The rule is four weeks.

However, it is still comparatively easy to deal with those citizens who have forgotten to pay their parking ticket, real estate tax, or day care. Complicated cases involving everything a certified accountant can dream of are pushed to the bottom of the pile.

This way of simplifying a complex tax system may not be pretty – but it sure is efficient.

And nobody had to ask parliament.

MORE:

this is one very disgruntled take on Danish taxes.

And don’t forget: tourists shop tax free

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