They are united by their Viking heritage but also their reputation shared as one of the most expensive countries to live and visit. Whether you buy a car or a TV, Scandinavian shoppers pay some of the highest prices in the world. Even the purchase of food is more expensive than the price of food and drink in three European countries. All three countries have an average VAT rate of 25%. Of all European countries, only Hungary has a high standard. Going to the bar is also a great price.
In Norway, having beer or a glass of wine will costs twice as much as 2.5 times the EU average. Both Norway and Sweden have a state-owned alcohol monopolies on that helps keep prices up. This model of the social market, rather than the free market model like the U.S., is common in Scandinavia and has helped people explain why the cost of living is so high. Scandinavian countries have large settlements with their own social costs, such as the percentage of GDP, among the highest countries in the world and this requires higher tax rates.
Sweden has a high personal income tax rate of more than 60%, while in Denmark it is more than 55%, both of which are significantly higher than the OECD. In Denmark, if you want to make a car you have to pay anywhere between 85% and 150% tax in addition to the cost of the car. And taxes do not stop there. Suppose I want to make a jersey in Denmark. I pay 300 kronor, but how much does that cost to the seller? Yes, it starts with 25% VAT - leave the seller with 240 kronor. The clothing store must also pay 22% of the income tax to companies. That means most of the money I paid for my jersey goes to the Danish government.
Not to mention that there is a high tax on employees' salaries and the store still has to pay rent, electricity, and cleaning - all taxable, too. These taxes mean that for Scandinavian businesses to make a profit, they need to charge their consumers higher prices. For some companies, this has proven to be a huge burden on their business model.
The largest furniture company, IKEA, was founded in Sweden but relocated its headquarters to the Netherlands. With the reorganization of the business, the business now has a Dutch parent company that is not profitable. Partly because of high taxes in Sweden. But according to some experts, Scandinavia's democratic tendencies have led to stronger social cohesion and have helped to provide political stability. This, in turn, has made their economy a safe haven for foreign investors - one of the reasons why the currencies in Denmark, Sweden and Norway, called the krona, are strong. This can be difficult for tourists with an exchange rate and do not do them any favors.
If the cost of living in Scandinavia is so high, then why are its citizens not so happy in the world? For the past five years, Scandinavian countries have been leading the World Happiness Report. That is an indicator of general health satisfaction based on a variety of contributing factors. Some experts say that these levels of high satisfaction in the larger Scandinavian social order ensure that they ensure financial security, job security, and economic distribution. As a result of higher taxes, citizens have access to free education, affordable child care, efficient public transportation, and the provision of free health care. But a large and expensive social welfare state does not mean the best.
For example, Norway is the only Scandinavian country to be ranked in the top 10 in adult basic education, among OECD countries. And Scandinavians are always happy with this situation, living within the economic environment of a social organization that provides reliable economic prosperity. Having beer at the end of the day costs less, but for people who live and work in Scandinavia, higher prices provide a quality of life worth paying for.
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