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In Denmark, we have some ridiculous rules and regulations in our tax system.
Take as an example the law that says if you “on paper” earn a return from your stock you must pay taxes on that return.
This is very stupid, because it prevents some businesses in investing in new projects and other businesses.
As you can guess in that way it holds the economy back.
Interestingly enough, the taxes affect only businesses.
This does not make sense, because it’s businesses that often have more money to invest than the normal private people.
As I see it, the biggest problem with this tax system is that the math doesn’t add up.
Let me explain in low numbers, just because it is very easy to calculate.
Let’s say you have $1000 in your company and you invest all of the $1000 which, of course, means you now have $0.
Say that after a year if the stock price raised to $1500, and you did not sell the stock.
This means you still have $0 to pay bills, but because the stock price is raised $500, you must pay taxes of the $500 profit.
The problem is that you really don’t have any money to pay the taxes, which will result in a debt to SKAT (the danish tax system), and that can be very expensive.
So what that means is, to stay out of debt you are forced to sell some of your stock papers.
The taxes can destroy workplaces, because when a company has to pay the extra tax, there will be less money to pay employees.
Even in the example above, where the company does not earn money, it must still pay taxes.
In that situation, it is clear that the company can’t afford employees.
Let’s take the example from above further, you must still pay some taxes (for the $500) with your $0.
For not getting into debt you sell stocks for $100, but out of these $100 you must pay an even higher tax.
As some of you may have heard, in Denmark the tax rate is very high.
Because of the high tax rate you, out of the $100 would be left with about $50.
Out of those $50 you need to pay taxes for the remaining $400, all the company’s expenses and employees’ salaries.
As you can see there’s really not much left to pay salaries to the employees, let alone expand the business.
There is not that much I can do as a small company and a private person.
This is also, since I have no intention to go in politics.
I can only hope that the politicians in Denmark read all the posts about this stupid rule.
I have, however, done something active to get the politicians to change the rules about Danish taxes.
I have written to the Danish Liberal Party what I think about this rule, and how it hold back the Danish companies that are affected by this rule.
So I hope they will take it up in Denmark.