Foreigners moving to Denmark should be beware of church tax

In Denmark members of the state church (Folkekirken) pays church tax, which is collected from their pay checks together with other tax. The church tax depends on what municipality you live in, but in 2008 it was on average 0.8756% of your income. Considered that the average income for people who received a wage in 2008 was 284,065 kr. (approx. $53000), this amounts to more than 2000 kr. per year (approx. $375).

That's a fairly large amount of money going to the churches (on top of the money getting channeled from other taxes), but it is presumable acceptable if you're a member of the state church.

But what if you're not?

Well, in Denmark, church membership is tracked by a central register, or rather the central register, so for most Danes that's not really an issue. People who are baptized are members of the state church (at least until they actively leaves the church), while those who are not baptized aren't members (even though mistakes have been known to happen).

But what if you're not born in Denmark?

Well, if you live in Denmark, you will be registered in the central registry, based upon information you have provided when moving to Denmark. Theoretically this would mean that you won't pay any church taxes if you don't indicate that you're a member of the Danish state church (a check box on the form).

But this is only theoretically the case. The truth is, that many, perhaps even most, foreigner gets registered as member of the state church, and thus pays church taxes. I know several people this has happened to - in my last job it had happened to both a Norwegian and an Indian colleague of mine, none of which are members of the Danish state church (or any other state church for that matter).

So, if you're a foreigner who has moved to Denmark, make sure to check that you're not registered as a member of the Danish states church. If you are, make sure to complain to the municipality straight away, so you don't end up paying church taxes. If you already have paid church taxes, make sure to complain to the tax department, so you can get the money refunded - this might not be easy, so the earlier you discover your unwilling membership, the better.

Ineptitude with numbers

Quite frequently, one comes across comments which clearly demonstrates that a person hasn't got a grasp of the numbers involved, and today I came across one such comment.

It was in the comments to a NY Times Op-ed on taxes, and it stated the following

If the United States had a Value Added Tax of 22-25 percent on consumption, we could eliminate the personal and corporate incomes taxes altogether. We would not need to send tax forms on April 15 because all the money would have been collected as we purchased goods and services. And if we were frugal in our consumption, then all the money we did not spend would be ours. Plus, we could design such as system, as dozens of other nations have, so that the VAT on essentials such as food and medicine and housing would be low and thus socially equitable. Not only would we have low administrative costs for such a system, it would be very difficult for cheats to avoid payments, as they so easily do now. Finally, it would generate more than enough money to balance our federal budget. Too bad, that so many special interests have so many loopholes and fight so hard to keep this antiquated, corrupt, inefficient and inequitable approach to taxes -- and our elected representatives capitulate to them.

Source

I found this comment quite amusing for several reasons, and pretty damn annoying for a much more simple reason.

First of all, the annoying part - taxation through consumption is an unfair way of taxation, since it hits the poor disproportionally hard. Rich people use less of their money on consumption than poor people, and for people who live below the poverty line (13.2% in 2008) and shift from income taxes, where they don't pay anything, to a consumption based tax, would mean a decrease in their coverage of their basic needs.

And now for why I find it amusing.

I live in a country which not only has a much higher income tax than the US (it's not possible for an American to reach the tax rate I pay for my last earned money), but it also has a sales tax of 25%. Many goods, such as cars, electricity, and water, have additional taxes on them (e.g. cars have approximately 200% taxes on top of their price).

Out of the 800 billion kroner paid through taxes of all sorts, 491 billion kroner came from income taxes and 40 billion kroner came from corporate income taxes, while only 168 billion came from the 25% sales tax (called moms in Denmark). All number are from Danmarks Statistik.

As these numbers make clear, a 25% sales tax would be nowhere near compensating for removing income taxes and corporate taxes. Not in Denmark, and not in the US, even when one take into consideration that Danes pay more in taxes than Americans.

According to this website the income taxes collected in the US in 2008 was $2.3 trillion. The corporate taxes were $354 billion. Altogether, $2.7 trillion or so.

The US Bureau of Labor Statistics conducts a Consumer Expenditure Survey (.pdf) which we can use to find the US consumption. The 2008 survey found that there are ~121 million consumer units in the US, each of which, on average uses $50,486 per year. Multiplying these two numbers gives us a total consumption of ~$6.1 trillion. If we assumed that people had paid 25% sales tax of this consumption, this would result in ~$1.5 trillion - a shortfall in the region of $1.2 trillion compared to the current tax income from income taxes and corporate taxes alone.

Even if all the money saved from not paying taxes would be added to the consumption (an unlikely case, as muchof it would be invested), the idea would still call short - the sales taxes this would generate would only amount to $675 billion, bringing the total up to ~$2.2 trillion, still half a trillion short.

And then we haven't even addressed the deficit, which this new taxation should somehow also solve.

Snipes acquitted of tax fraud

Quite surprising, actor Wesley Snipes has been acquitted of tax fraud.

The NY Times reports:

The actor Wesley Snipes was acquitted of the most serious charges against him on Friday in the most prominent tax prosecution since Leona Helmsley, the billionaire hotelier, was convicted of tax fraud in 1989.

Mr. Snipes was found not guilty on two felony charges of fraud and conspiracy. He was also acquitted on three misdemeanor charges of failing to file tax returns or to pay taxes, but was convicted on three others. He faces up to three years in prison.

Mr. Snipes had become an unlikely public face for the tax-denier movement, whose members maintain that Americans are not obligated to pay income taxes and that the government extracts taxes from its citizens illegally.

Snipes' two co-defendants, a prominent tax denier and a disbarred accountant, were on the other hand convinced on separate felony count. Since Snipes relied on their advice, it clearly demonstrates that while Snipes are getting off relatively light, it's not because of the court buying into the legal arguments, but rather because he is considered less guilty of fraud than the ones who gave him the fraudulent advice.

Considering the legal minds helping Snipes, I am actually surprised he got off so lightly. Just look at this example from the NY Times article:

Kenneth I. Starr, a New York accountant who had long prepared Mr. Snipes’s tax returns, testified that he dropped Mr. Snipes as a client after he refused to pay taxes. Defense lawyers tried to attack Mr. Starr’s credibility, portraying him as dishonest and the target of a grand jury inquiry — accusations that Mr. Starr rebutted by pointing out that he was a witness before the grand jury, not its target.

Why would anyone that incompetent be allowed to practice law? Of course, at least some of them were part of the tax denier movement as well:

The lead lawyer among the six representing Mr. Snipes, Robert G. Bernhoft of Milwaukee, has been under a federal court order since 1999 barring him from selling materials that supposedly relieve people of the need to pay taxes.

Normally, I wouldn't care much about celebrity cases like this one, but Snipes is using the standard rhetorics of the tax denier movement, which is heavily represented in the far right circles like Christian Identity.

I find it a bit problematic that Snipes was acquitted over something that was obviously fraudulent, but it's good that the advisers were found guilty. Now, it's going to be interesting to see what kind of jail time Snipes gets. He faces up to 3 years, and I would suspect that he'll get a fairly heavy punishment within that frame.