Denmark topped the OECD’s 2019 ranking for the highest tax burden among the organization’s 37 member economies, with a tax‑to‑GDP ratio of 46.3 %. The figure represents the share of national income collected through all taxes, including income, corporate, and consumption levies.
How Denmark reached the top
- Income‑tax rise: The increase was driven primarily by a 2.4 percentage‑point jump in income‑tax rates.
- Consumption‑tax offset: A decline in non‑VAT consumption‑tax revenues partially offset the rise, but not enough to prevent the overall increase.
- Growth compared with peers: Between 2018 and 2019 Denmark’s tax‑to‑GDP ratio grew by 2 percentage points, the largest change among OECD members that year. This leap allowed Denmark to overtake France, which had led the ranking in 2017 and 2018.
The OECD released the data in a December 2020 report, noting that it can take up to 11 months for a high‑tax country to compile and publish its full tax‑burden figures.
Context within the OECD
- The OECD (Organisation for Economic Co‑operation and Development) groups 37 of the world’s most developed economies and is often described as a lobbying body that promotes higher tax collection among its members.
- Membership does not guarantee uniform tax policy; however, the organization’s annual conventions provide a forum where member governments discuss fiscal strategies, sometimes resulting in coordinated tax increases.
Economic freedom versus tax burden
- Despite its high tax load, Denmark ranks 8th in the Heritage Foundation’s Index of Economic Freedom, indicating relatively liberal market policies, strong property rights, and efficient regulatory environments.
- The contrast illustrates that a high tax‑to‑GDP ratio does not automatically equate to low economic freedom; other factors such as governance quality, infrastructure, and public services also shape the business climate.
Alternatives for high‑income individuals and entrepreneurs
Countries outside the OECD or those with targeted tax‑friendly regimes can offer substantially lower effective tax rates:
| Region / Country | Notable Tax Features |
|---|---|
| Portugal | Flat personal income tax rates for certain foreign residents; non‑habitual resident regime offering tax exemptions on foreign income. |
| Singapore | Low corporate tax (17 % capped at 10 % for qualifying income) and no capital gains tax. |
| United Arab Emirates | No personal income tax; corporate tax limited to specific sectors. |
| Malaysia | Various incentives for expatriates and investors, including the “Malaysia My Second Home” program. |
| Georgia | Low flat personal income tax (20 %); incentives for foreign investors, including tax holidays and reduced rates in free‑zone areas. |
These jurisdictions often combine tax incentives with streamlined business registration, favorable residency programs, and, in some cases, additional perks such as hospitality incentives for investors.
Practical considerations for relocation
- Overall tax exposure: Even in low‑tax jurisdictions, individuals must account for any remaining obligations in their home country (e.g., U.S. citizens are subject to worldwide income tax regardless of residence).
- Legal compliance: Relocating for tax purposes requires meeting residency criteria, which may involve minimum stay periods, investment thresholds, or proof of economic activity.
- Public services trade‑off: Lower tax rates can correspond with reduced public services; prospective movers should evaluate healthcare, education, infrastructure, and personal security in the target country.
- Future policy risk: Membership in the OECD can signal a propensity for future tax increases, as member governments often share fiscal ideas and reforms discussed at OECD meetings.
Decision criteria
When assessing whether to move from a high‑tax OECD country (e.g., Denmark, France, the United Kingdom, the United States) to a lower‑tax jurisdiction, consider:
- Effective tax rate on personal and business income after accounting for all applicable taxes and deductions.
- Residency requirements and any associated investment or property purchase obligations.
- Quality of life factors such as healthcare, education, safety, and infrastructure.
- Stability of tax policy—countries with long‑standing low‑tax regimes may offer more predictability.
- Legal and reporting obligations in both the current and prospective jurisdictions.
By weighing these elements, high‑net‑worth individuals and entrepreneurs can identify jurisdictions where the overall fiscal burden aligns with their financial and lifestyle goals.
