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Public policy

See also: Flexicurity and Taxation in Denmark

Also related: Taxation in the Faroe Islands and Taxation in Greenland

Danes enjoy a high standard of living and the Danish economy is characterised by extensive government welfare provisions. Denmark has a corporate tax rate of 22% and a special time-limited tax regime for expatriates.^[132] The Danish taxation system is broad based, with a 25% value-added tax, in addition to excise taxes, income taxes and other fees. The overall level of taxation (sum of all taxes, as a percentage of GDP) was 46% in 2017.^[133] The tax structure of Denmark (the relative weight of different taxes) differs from the OECD average, as the Danish tax system in 2015 was characterized by substantially higher revenues from taxes on personal income and a lower proportion of revenues from taxes on corporate income and gains and property taxes than in OECD generally, whereas no revenues at all derive from social security contributions. The proportion deriving from payroll taxes, VAT, and other taxes on goods and services correspond to the OECD average^[134]

As of 2014, 6% of the population was reported to live below the poverty line, when adjusted for taxes and transfers. Denmark has the 2nd lowest relative poverty rate in the OECD, below the 11.3% OECD average.^[135] The share of the population reporting that they feel that they cannot afford to buy sufficient food in Denmark is less than half of the OECD average.^[135]

Labour market

Like other Nordic countries, Denmark has adopted the Nordic Model, which combines free market capitalism with a comprehensive welfare state and strong worker protection.^[136] As a result of its acclaimed "flexicurity" model, Denmark has the most free labour market in Europe, according to the World Bank. Employers can hire and fire whenever they want (flexibility), and between jobs, unemployment compensation is relatively high (security). According to OECD, initial as well as long-term net replacement rates for unemployed persons were 65% of previous net income in 2016, against an OECD average of 53%.^[137] Establishing a business can be done in a matter of hours and at very low costs.^[138] No restrictions apply regarding overtime work, which allows companies to operate 24 hours a day, 365 days a year.^[139] With an employment rate in 2017 of 74.2% for people aged 15–64-years, Denmark ranks 9th highest among the OECD countries, and above the OECD average of 67.8%.^[140] The unemployment rate was 5.7% in 2017,^[141] which is considered close to or below its structural level.^[142]

The level of unemployment benefits is dependent on former employment and normally on membership of an unemployment fund, which is usually closely connected to a trade union, and previous payment of contributions. Circa 65% of the financing comes from earmarked member contributions, whereas the remaining third originates from the central government and hence ultimately from general taxation.^[143]