Great news: Denmark is cutting the tax rate on new cars to 100 percent

August 30, 2017

Maybe you've just graduated from college and you're looking for a Scandinavian adventure. Maybe you're having a mid-life crisis and you want to shake things up a bit. In either case, you might've asked yourself: should I move to Denmark?

If so, and if the answer to that question was a resounding "Ja!", we have some great news: the Danish government plans to reduce the tax rate on new cars to a mere 100 percent

Car fans might think of Denmark as the place where shoppers can buy cars totally online. Or perhaps they know it as one of many winter-friendly nations that are angling to get gas and diesel vehicles off the road. Or maybe they remember it best as the tiny country that wanted everyone to drive electric cars with swappable batteries before the company that built them went kaput

What folks might not think of when Denmark crosses their mind is sky-high taxes, but in fact, the country is home to one of the world's steepest tax rates on new cars. Denmark has heavily taxed vehicles for over a century, and with no domestic auto industry to lobby against such taxes, rates have continued to climb.

Today, Danish auto shoppers can expect to shell out up to 180 percent of their car's sticker price on taxes and registration. (And you thought the Danes loved their bikes because of the country's natural beauty and flat terrain.) 

In more specific terms, that means that a vehicle like the Volkswagen Golf, which costs just over $21,000 in Germany, starts at $34,000 in Denmark. The rate can be far higher on luxury models: for Danes, a Porsche Carerra runs about 160 percent above its typical sticker price.

Reducing the tax rate on new vehicles is part of Prime Minister Lars Lokke Rasmussen's plan to encourage more Danes to work. The country enjoys a robust economy, with an unemployment rate of just 3.5 percent. By lowering taxes on cars, Rasmussen hopes to make commuting jobs more attractive and to boost spending. 

It's all part of a larger package being cobbled together by Rasmussen's government that would scale back Denmark's sky-high tax rate and broaden its sources of revenue. The Organisation for Economic Co-operation and Development says that Denmark derives nearly 47 percent of its GDP from taxes--higher than any other developed nation. (For reference, only about 26 percent of America's GDP comes from taxes.)

Can Denmark can keep its revered social programs like free schools, hospitals, and elder care while simultaneously easing the tax burden on its citizens? Will car ownership make Danes more comfortable with scalebacks in services? Or will Rasmussen's plan fall to pieces, like a Lego castle being crushed beneath a Viking's boot? Stay tuned.  

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