Paying taxes in the Nordics: a story of trust

#TaxDay today. Well, at least in the US. Actually, the only countries that are fully entitled to have a national Tax Day are the Nordic countries. You have all read about their tax system, how much they pay (ridiculously high some would say) and how happily people there pay their taxes. So, yes, we could suggest the introduction of a #NordicTaxDay and that day could be when taxpayers there need to fill in their annual reports.

But is this whole thing really like this? Do Nordic people pay their taxes happily? If so, what is the reason behind? Mythbusting time!

First things, first. How is the tax system in the Nordics?

It is pretty simple, both as a concept and as a procedure as well. Although there are slight differences among the tax systems from Nordic country to Nordic country, still the underlying concept is the same: you pay a lot in taxes but you get a a loooot in return. Fair enough? It sounds fair.

And they have a lot of free things to enjoy in the Nordics because of that. Count them: free universal health care, free education (or in some cases very low tuition fees), paid parental leave, generous unemployment benefits, grants to start new businesses, monthly benefits when you go to school or university and many more. Well, that sounds so fair! Kudos!

Do people in the Nordics pay their taxes happily?

There is a myth here. Nordic people pay their taxes. Yes, it is true. And tax evasion is very low. But that does not mean that they wake up in the morning and they happily open their wallets and bank accounts to pay. No one wants to pay. However, there are two things to consider here:
– first, most of the taxes paid are not seen. They are taken from your income before this gets into your bank account. So, they virtually do not see how much they pay for taxes or at least they do not have to make payments themselves (in most cases). There is often a tax return that many Nordic people crave for, in order to get their summer holidays arranged
– then, there are direct and indirect taxes. Direct taxes are taken from income. Indirect taxes (like VAT) are high as well but are paid as long as they consume. Because of their high income, the Nordic people spend a lot and prices are super high.

Top-5 reasons why you should be paying taxes, like the Nordic people (plus an asterisk*)

There is no place on Earth called paradise. Every place and people have their pros and cons. The thing is that we must work with ourselves in order to make every place a better place to live in. For good or bad, money (and taxes) play a big part in people’s and societies’ happiness.

Here are some creative ways to think about paying taxes (copy paste from the Nordics):

  • You get a fair deal: you pay a lot but you get a lot in return. Repeat that after us. It is so fundamental but not taken for granted. As a next step, you have to push authorities in your country to give you more in return for your taxes. Fair, right?
  • It’s an investment in society: you work and get money. If you pay some money in taxes, you help society as a whole to invest in common goods that everybody can enjoy.
  • You pay for those who can’t: that is true. Those who earn more money than others must pay to redistribute the overall income among all society members. So, everybody can have a minimum standard of living and the same opportunities in life.
  • What goes around, comes around: you may be at a position in the future when you will be the one in need. It is about creating a safety net for everybody (including your future you and your beloved ones).
  • You create a society that is a pleasure to be part of: that may sound very philosophical but it is true. With all the above (supported in part by paying one’s fair share of taxes), people feel more safe, secure and happy. Then, everything runs more smoothly.

* This is the asterisk: in order for all the above to be valid and truly work, there is one thing needed: trust. Establishing trust (in others, institutions, society) can make this whole pay-benefit system work to everybody’s benefit. In Nordics we trust!