Economic theory as well as international empirical data point to a potential for economic growth especially by reducing high marginal tax rates. In this paper, the combined effect of 30 years of Danish tax reform is estimated to have increased GDP by approximately 10 per cent, and economic welfare by the equivalent of 6 per cent of GDP. Nevertheless, room remains for further reform, as Danish taxes are still very high, even if the prospect for expanding tax bases further has become slim.
NOTE: This working paper was published by the Palgrave Macmilla Studies in Banking and Financial Institutions as part of "Taxation in Crisis: Tax Policy and the Quest for Economic Growth".
The abstract reads:
"This book offers a comprehensive guide to modern day taxation issues. It presents a thorough overview of many of the crucial aspects of applied taxation and current tax systems, and presents evidence that supports taxation as an important policy issue requiring immediate address globally.
Contributions seek to address the core question of how to design a tax policy mix that can serve primarily efficiency, growth and possibly equity goals at a time where fiscal spending, for many economies, is not a viable option. Chapters provide a historical perspective on taxation, then go on to cover aspects of the modern theory of optimal taxation and tax design and provide valuable international perspectives on current tax practices and much required tax reforms. Empirical analysis on taxation and related economic data help the readers to understand how data-based observations and results are linked to the theory of taxation, and more importantly economic growth, before offering appropriate policy prescriptions. This book will be of interest to scholars and practitioners interested in learning more about taxation and why it matters today in the global economy."