The Fiscal Trilemma in a Danish Perspective

Rasmus Højbjerg Jacobsen, Søren Bo Nielsen, Anders Sørensen

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This article argues that the "fiscal trilemma"-the tension between sufficient revenue and long-run fiscal sustainability on one side; medium- to long-run growth opportunities on the other; and progressivity and avoidance of inequality on the third side-is very much present in Denmark. We provide an overview of main features of the Danish tax system; the state of fiscal balances in the short and longer run; growth and productivity developments; and the extent of inequality in the Danish society. Thereafter, we go into details with reforms and changes in the tax system over the last twenty-five years and diagnose main problem areas. We argue that the tax reform carried in Parliament on September 13, 2012, does not pass a "trilemma test"; that is, it is in conflict with at least one of the three key considerations. Finally, we put forth reform elements that should improve the system
Original languageEnglish
JournalPublic Finance Review
Issue number6
Pages (from-to)791-823
Publication statusPublished - Nov 2013

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