Selskabsskat i Danmark

Abstract

The purpose of this thesis is to analyze the impact of a reduction of the corporate tax rate in Denmark. The thesis is analyzing the corporate tax income from 1970 to 2021 in both Denmark and Ireland to see if there is any context between the corporate tax rate and the corporate tax income. To analyze the impact of a reduction of the corporate tax rate there is an examination of different scenarios with 12,50 percent tax rate and 0 percent tax rate.
The results of the historical review of the corporate tax income shows that both Denmark and Ireland had the highest amount of paid corporate taxes in 2021 in the history of both countries even though the tax rates are at their lowest point ever. The reason for the Danish corporate tax income to be at the highest level ever is because every reduction of the corporate tax rate has been financed with an expansion of the tax base for corporations. Every time the tax rate has been reduced there has been changes in the tax deductions for the corporations like less favorable depreciations on buildings and other assets, elimination of inventory write-downs and elimination of the investment trust fund which all resulted in the corporation’s tax base to increase. Besides this there has been an increase of corporations in Denmark with 12 times more registered corporations in 2021 compared to 1970 which also had an impact on the corporate tax income.
The results of the examinations of the different tax rates shows that the effective tax rate for dividends is reduced from 54 percent to 48 percent when the corporate tax rate is increased to 12,50 percent and with an elimination of the corporate tax the effective tax rate for dividends is reduced to 41,40 percent. When the corporate tax rate is reduced to 12,50 percent the tax paid by the corporation is decreased by 3 to 8 percent in the different scenarios and when the corporation tax is eliminated the tax paid is decreased by 8 to 21 percent. If the corporation manages to hire an employee who can create growth for the company and earn triple of their own pay the examination show that the tax paid by the corporation, the employee and the owner will be increased compared to the present taxation rules for salary, dividends, and corporate taxation.
This thesis finds that the regulation of the corporate tax rate has had very little impact to the corporate tax income in Denmark because it has always been financed by the corporations itself. The thesis also finds that the effective tax rate will decrease if the corporation tax rate is changed but if the corporations manage to hire employees who can create growth for the company, then the reduction or elimination of the corporate tax rate might cause an increased tax income.