Taxation of Cross-Border Labor Income and Tax Revenue Sharing in the Öresund Region

Due to the Nordic Tax Treaty, commuters pay their income taxes where they earn income. This creates problems in local government finances in Scania County of Sweden, because the number of commuters received on both sides of the Öresund Strait is not symmetric, but the flow from Scania County of Sweden into Copenhagen County of Denmark is about 25 times as large as the other way around. This paper aims to document asymmetries in commuter flows in the Öresund Region and the loss in income tax revenue due to the asymmetric magnitudes in the flow of commuters. We propose renewed negotiations between Sweden and Denmark on the income taxation in the Öresund Region in order to sustain local public services in the region.