Low taxes not attracting Danish workers to work more

Sunday, 03 June 2012
As the Danish government wants to design the tax reform such that lower taxes will ignite the desire more Danish people to work more, it turns out that lower taxes play little role in increasing the amount of hours to work.

According to a new study published in various Danish press on Saturday, few people will work more if the tax is lowered.

The center-left think tank Cevea, which is behind the study, concludes that "tax cuts are not an effective instrument to increase labour supply and can under no circumstances stand alone".

According Cevea’s director Kristian Weise, the government should do away with the belief that tax cuts are "wonderful product" that provide more hands to work.

“The government is trapped by the challenge of the past decade which has been viewed as increasing the supply of labour. And it was done by giving people less in transfer payments, and therefore some tax cuts,” says Kristian Weise.

Cevea has asked Danes between 18 and 64 years, if they will work more if taxes are lowered.
23 percent want to work more, while 12 percent want to work less. On the whole it means that only 11 percent want to work anymore.

In fact, the study reveals that 45 percent did not have the opportunity to work more, even though they might like.

An example attributed is the internal rules in the workplace or collective bargaining agreements which set limits on weekly working hours - or that they do not get paid for extra work.

Cevea has also looked at the experience of the government’s pas three tax reforms in the 2000s, each time there was reduced taxes on labour. When that was done, it reaches the same conclusion:
The demand for labour and supply does not, determines how much we work.
Nevertheless, the Government expects that the tax reform will increase labour supply by 14,600 persons and tripartite negotiations to increase the work with the equivalent to 20,000 people by 2020.
By Scancomark.se Team

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