Taxation

Public finances and taxation

The foundation of the Danish welfare system is a sound taxation scheme with healthy public finances. An efficient tax system is a necessity to provide public goods, accommodate market failures, redistribute income, and stabilise the economy. However, people and businesses are driven by incentives, and creating an efficient tax system requires thorough analyses.

Cases

Analysis of the expansion of the “New right to earlier pension” and the “Senior pension” scheme

There is wide support among the Danish population to allow the most debilitated workers to retire early. However, a proposal for a new early retirement scheme by the government is directed towards workers with many years in the labour market and does not consider whether the individual worker is in fact worn out. If adopted as-is, the government’s new proposal for early retirement would exist alongside the current senior pension scheme that is directed towards the most debilitated individuals. In our analysis, we compare the costs of expanding the eligibility of the current senior pension scheme to a wider age group versus the costs of expanding government’s new proposal for early retirement.

 

We find that an expansion of the existing senior pension scheme would bring 3.800 individuals to early retirement and only cost 26.000 DKK per person in 2025, while expanding the government’s proposal would bring 10.500 to early retirement and cost 98.000 DKK per person in 2025. This large difference is due to the fact that only few individuals who join the senior pension come from employment, whereas the opposite is the case for the government’s early retirement scheme.

 

Gigtforeningen

Economic consequences of the Fehmarn Belt fixed link

Stagnated traffic development, lower EU-support, and other changed preconditions are challenging the profitability of the Fehmarn Belt tunnel. 

 

The Danish parliament has decided to construct an undersea tunnel in the Fehmarn Belt. A key prerequisite for this decision was that the entire Fehmarn-project is paid solely by the future users of the tunnel and therefore not by the Danish taxpayers. However, our analysis of the implications of traffic development, lower EU-support, and other changed preconditions of the project, makes us conclude that the economic case of the project can no longer be characterized as solid.   

 

Calculating the economic implications of the lower traffic and thus lower expected revenue from road tolls together with the lower financial support from the European Union, we find that the project can be expected to generate a loss of around 3 billion DKK (in 2014-prices). The Fehmarn-project will generate a loss of around 32 billion DKK (2014-prices) if the expected prices for cars and lorries are adjusted downward similarly to what was decided on the Oresund Bridge after its opening.

 

Scandlines

Pejlemærker for en grønnere og mere fair transportsektor med mindre trængsel og spildtid på danske veje

An intelligent road pricing system can reduce the congestion and create substantial gains for the society.

 

Increasing road traffic is the cause of increasing problems with road congestion, noise, and climate change. The annual cost to society from road congestion is estimated to be about DKK 24 billion (approx. EUR 3.2 billion) and road transport is the cause of 28 per cent of Danish CO2 emissions. The Danish society can therefore potentially gain much by improving transport policy. The purpose of this report is to provide a proposal for future-proof transport policy, such that the external effects of transport, especially congestion and climate changes, are handled in the best possible way. We analyse a country-wide road pricing system, where a charge is levied for each kilometre of which cars, lorries, and vans drive on Danish roads. The system consists of three components:

  • a basic charge, which is independent of the time and place of which a vehicle drives on Danish roads
  • a time- and place dependent charge, which increases in steps depending on the level of congestion Our findings suggest that the road pricing system can reduce congestion by a half in the area surrounding Copenhagen and by 20 per cent in the rest of the country. Furthermore, traffic will be reduced, leading to a reduction of CO2 emissions by 5 per cent. We propose a road map for the introduction of road pricing in Denmark. The road map includes a stepwise introduction of road charging, where first lorries, then vans and finally cars are encompassed by the road pricing system. 

 

Transportgruppen 3F

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