Merete Nadersen

Student thesis: Master thesis


One of the cornerstones in the Danish taxation system, is our principle of ability to pay tax, which shall ensure a progressive taxation. The progressive taxation, is a tax principle, that is based on, that the tax percentage, increases, when the tax base (foundation) is higher. This means there will be paid more tax of the last earned taxable Krone, than the first earned. The tax of the last earned Krone, is also referred to as marginal tax. Progressive taxation is especially being used in the area of income tax, where the tax percentage depends on the size of the income. In practice a stepwise graduation is often used. The division in low and high taxation in Denmark, is thereby an expression of stepwise, progressive taxation. Some years ago, there were also a middle step, called middle tax. From the year 2010, this middle tax was removed, due to the Danish taxation reform from 2009. One of the advantages of progressive taxation, is that the tax payers, pay tax based on ability. In this way we are sort of helping each other. However, in Denmark you can also achieve a few taxfree allowances, both directly in the tax itself, but also in the taxable income. The interesting part is then, whether we Danish people comply with the principle of ability to pay tax, or whether this principle does not hold. But what does it actually mean, ability to pay tax? The principle of ability to pay tax, is basically covered by a maxim, ”the broadest shoulders, should carry the heaviest burden”, but at the same time the Danish taxation system is also built on a principle of equality. This principle of equality is an equalization of all Danish tax payers, this means all tax payers have the ability to achieve the same, e.i. if two tax payers circumstances are identical, then their tax details will also be identical. However, an interesting point is, how the principle of equality and the principle of ability to pay tax, contradict each other. Luckily, this is not the case. In practical, it is clear that they are two different things, although they are very much connected. The principle of equality is to be found in the texts of law. The similarity for tax purposes is, that the taxation, takes place according to the law of taxation, in which it is written, that by given conditions X is achieved. A good example is PLS §3, that prescribes what personal income imply, therefore it is the same for everyone. If you experience discrimination, you have the right to complain. A breach of the principle of equality will therefore often be used in case of a law breach. It is a bigger challenge to verify the principle of ability to pay tax. This is more uncertain. Here you also have the question of moral as well. A doctor with the responsibility for the life of his patients, should he not have the allowance of gaining some advantages/benefits by giving him a greater disposable income? It is interesting though, to turn the problem at hand the other way round. The tax payer that starts to work, right after high school, indirectly pays the doctors education, via his/hers tax. In the years that the doctor is under education and receiving student grants from the council/state, the other tax payer will be paying more in tax, due to his/hers better tax ability, which is why it seems fair, that it goes both ways. The most interesting part is, if the principle of ability to pay tax, is influenced by our civil status. Does a single person pay more in tax, than a married couple? Will a ”single parent” family be favorized in tax matters by a more modest tax, due to his/hers civil status as single parent. This thesis therefore have a closer look at the ordinary tax rules, which rules are applicable for the ordinary citizen’s tax details. Which options are there in the Danish taxation system, and what does the Danish tax details contain of elements, and how is it calculated. After having looked at the rules, the principle of ability to pay tax, is verified. In Denmark we have different levels of education, which leads to differences in the Danish incomes. It would also be strange , if e.i. a doctor had the same income as someone who fillets fishes. In other words a higher education versus an unskilled person. These differences in income, are taken into consideration for the analysis, both to clarify the income level in Denmark, but also to analyse if it is influenced by the civil status. The tax calculation of the analysis is therefore being done as well for the lower paid jobs, medium paid jobs and the higher paid jobs. This is simply to form the best possible overview, for the total analysis of, whether the principle of ability to pay tax, is applied in the Danish taxation system. The interesting matter is not only that the tax is affected by the different income levels, and the many rules. It is also interesting, if after the tax is paid, there are any unevenesses. The principle of ability to pay tax, is not only about the tax that has been paid, for of course it is also interesting to see how much the principle of ability to pay tax, shines through. It is also interesting to see, after the tax calculations, how much does people then have left to spend? The ability to pay tax, has that good thing about it, that he who has a little bit extra of money, pays a small fraction more to the community. This thesis therefore will prove, how the tax burden meets the principle of ability to pay tax, with a particular reference to, how civil status influences the taxation position.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages79