Danish business organisation DI: Top tax rate costing country billions

Abolishing the additional tax on high earners would increase the supply of labour and GDP, according to study

Sep 28, 2015

The business interest organisation Dansk Industri (DI) has elaborated how much better off Denmark would be if the top tax rate were lowered or abolished, Berlingske Business reports.

Would boost GDP
The study found that doing away with the additional top tax rate of 15 percent would increase the supply of labour by the equivalent of 16,000 people working full-time and boost the gross domestic product (GDP) by 15 billion kroner.

This projection is on the basis that abolishing the top tax rate would encourage top tax payers to work an average of 1.7 percent more, more people to go after high-paying jobs and fewer highly-educated people to leave the country.

The tax revenue from the top tax is 15.4 billion kroner this year and is expected to fall to 13.8 billion kroner next year as a result of the threshold being raised gradually as part of a 2012 tax reform.

This lost revenue, the study claims, would be offset by as much as 7.3 billion kroner in sales taxes from a rise in consumption associated with people being better off and more income tax at the lower rate as a result of the increased supply of labour.

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