Taxation rules and the impact on social expenditure
Social cash benefits may be either exempt from or subject to tax. In the Nordic countries, the level of taxation is relatively high, and therefore the tax status of a given benefit is very important.
Country differences on taxation
In the Nordic countries, the taxable proportion of the total cash benefit amount has increased in recent years.
There are, however, large differences between the countries. The largest tax-free cash benefits are granted to families and children. Other social benefits, such as social assistance, are subject to tax in Denmark and Iceland but not in the other Nordic countries.
According to the EUROSTAT´s specification, housing benefits are counted as services. To evaluate the significance of these differences, net social expenditure is calculated where direct and indirect taxes are deducted from social expenditure.