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The Fiscal Trilemma in a Danish Perspective

Author

Listed:
  • Rasmus Højbjerg Jacobsen
  • Søren Bo Nielsen
  • Anders Sørensen

Abstract

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.

Suggested Citation

  • Rasmus Højbjerg Jacobsen & Søren Bo Nielsen & Anders Sørensen, 2013. "The Fiscal Trilemma in a Danish Perspective," Public Finance Review, , vol. 41(6), pages 791-823, November.
    • Handle: RePEc:sae:pubfin:v:41:y:2013:i:6:p:791-823
    DOI: 10.1177/1091142113497082
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    References listed on IDEAS

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    1. Christian Keuschnigg & Søren Bo Nielsen, 2004. "Taxation and Venture Capital Backed Entrepreneurship," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(4), pages 369-390, August.
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    4. Junge, Martin & Severgnini, Battista & Sørensen, Anders, 2012. "Product-Marketing Innovation, Skills, and Firm Productivity," Working Papers 01-2012, Copenhagen Business School, Department of Economics.
    5. Henrik Jacobsen Kleven & Esben Anton Schultz, 2011. "Estimating Taxable Income Responses using Danish Tax Reforms," EPRU Working Paper Series 2011-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    Cited by:

    1. Ryota Nakatani, 2024. "Revenue Decentralization and the Probability of a Fiscal Crisis: Is There a Tipping Point for Adverse Effects?," Public Finance Review, , vol. 52(3), pages 376-396, May.

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