For consumers, cities like Tokyo, London or New York are often referred to as the most expensive places in the world because the cost is too expensive for everything. In fact, however, the new Scandinavian peninsula is an area that is recognized by most Westerners as the most expensive place in the world.
In Scandinavia, from one cake to the old vests are more expensive than other Western countries and they have its causes.
High tax, good quality of life
Scandinavia is an area in Northern Europe consisting of three countries: Norway, Sweden and Denmark. This area inherits Viking culture but is also famous for its expensive price. The products of television, cars or any kind of goods, consumers have to pay the highest price in the world.
Moreover, items of necessities such as drinks and food in this market are also more expensive than the average level of Europe. If you go to the bar, a glass of beer here will be 2.5 times more expensive than the European average.
Both Norway and Sweden hold monopolies on alcohol as well as some other items, causing the price of products to rise and fall.
The main reason for this situation is the application of 25% VAT in all 3 countries. Personal income tax in Sweden is higher than 60%, Denmark is over 55% and much higher than the 40% average of the Organization for Economic Cooperation and Development (OECD).
For example, in Denmark you want to buy a car, you will have to pay 85-150% of the tax for the car even if they are produced in the country.
As another example, if you buy a sweater in Denmark for 300 Kronor (37 USD), the seller will have to deduct 25% VAT, 22% corporate income tax, payroll tax. many other costs. Even the costs of electricity and water ... are taxed. Thus, most of the money that consumers pay will go to the state budget but businesses will not benefit much.
The reason for this heavenly tax is the huge public government expenditure with a high share of public spending on GDP globally. Much of this money is invested in education, health, social security as well as a range of other subsidies.
Scandinavia's economic model differs from that of the US free market economy when the state intervenes deeply.
The benefit of this move is that people enjoy a good quality of life when health and education are almost free. Infrastructure facilities are ensured despite difficult weather and environment conditions.
In the last 5 years Scandinavian countries are often among the happiest countries. Large welfare regime, ensuring financial security, work and economic benefits makes people accept to pay huge taxes and expensive prices.
Besides, the good quality of life makes Scandinavia a stable democracy, high social cohesion, and this stability has attracted a large number of investors and businesses.
In addition, the advantage of geographical location makes the products here can easily reach the European market, creating attraction for manufacturers. This is why the Scandinavian economy is quite stable and the currencies of the three countries in the region are quite strong.
In addition, many experts also believe that having fewer residents makes stores forced to raise prices if they want to keep profits when the market is not large.
Life is not like a dream
However, the disadvantage of this "subsidized" model is that businesses cannot tolerate too high costs. For example, the world's largest furniture company IKEA, established in Sweden, has moved its headquarters to the Netherlands. IKEA is currently a parent company in the Netherlands to avoid too high tariffs in Sweden.
Although high taxes make businesses have to raise selling prices, but rising prices mean companies have to raise wages for employees. Consequently, labor costs, sales, distribution ... all increase and cause businesses that need to spend a lot of labor and factories ... to shift to other locations.
Moreover, the high cost and the high exchange rate make the tourism industry here difficult. Tourists do not have a lot of incentives and the majority of the wealthy only tend to experience life in this market.