For decades, Denmark’s registration tax on new cars has been one of the state’s most reliable sources of income. That is now changing fast. Industry body Mobility Denmark forecasts that the tax could tip into negative territory as early as 2028, with the government paying out more in refunds than it collects.
According to the organisation’s projection, the state will take in around 4.5 billion kroner in registration tax that year, while 5.3 billion kroner is expected to go out as refunds on cars exported from Denmark. That leaves a shortfall of roughly 800 million kroner, before the cost of administering the system is even factored in.
The figures come from Mobility Denmark rather than an official government forecast, but the trend they describe is already well underway.
More cars sold, less tax collected
The strange part is that Denmark’s car market is not shrinking. It is growing. In the first eight months of the year, close to 132,000 new passenger cars were registered, up about 13 percent on the same period last year. What has changed is the mix: in August, 85.9 percent of all new cars sold were electric, the highest share on record.
That shift is precisely the problem for state revenue. Electric cars remain heavily favoured under the current registration tax, while petrol and diesel models trigger much larger tax bills. As a result, sales volumes can rise while total tax revenue falls. Mobility Denmark’s figures show the net proceeds from registration tax dropping from 20.3 billion kroner in 2019 to 5 billion kroner in 2025.
The forecast points to a further decline to 2.8 billion kroner this year and 1.6 billion kroner next year, before turning negative in 2028.
Mobility Denmark’s chief economist, Allan Skytte Christensen, frames the issue as a shrinking tax base rather than a shrinking car market.
Old petrol and diesel cars are adding to the pressure
A second trend is compounding the problem. As fewer new petrol and diesel cars enter the country, more older fossil-fuel vehicles are leaving it. When a taxed car is exported, its owner can reclaim part of the registration tax originally paid. The Danish Motor Vehicle Agency calculates the refund based on what the tax would be if the car were imported into Denmark at the time of export, minus a standard 15 percent deduction.
That means the state faces returning large sums of tax revenue collected years ago on Denmark’s ageing petrol and diesel fleet. Mobility Denmark expects around 40,000 tax-refunded exports in 2026, rising to 65,000 in 2027 and 85,000 in 2028. Registration tax revenue is being squeezed from both directions: less coming in from new electric cars, more going out on old ones leaving the country.
A bigger question about how cars should be taxed
The issue goes beyond an 800 million kroner gap in 2028. It raises a deeper question about how vehicle taxation should work going forward.
A government expert group on car taxes has been asked to examine models that would shift taxation away from the point of purchase and toward ongoing use. Among the options on the table is a permanent abolition of registration tax on electric cars, alongside a search for a more stable long-term revenue model. A first partial report is due in the second half of 2026.
Mobility Denmark is using its own figures to push for a specific outcome: scrapping the value-based registration tax entirely and replacing it with a recurring tax based on a car’s weight and energy consumption. In practice, that would mean lower tax at the point of purchase and potentially higher ongoing costs for owners. Chief executive Mads Rørvig argues that Denmark needs to move away from taxing a car’s price and instead charge based on weight and energy use over time.
Whether policymakers land on that particular model remains far from certain. The expert group is weighing multiple approaches, and a running tax based on usage would raise its own questions about which drivers end up paying more. But if Mobility Denmark’s numbers hold up, Denmark faces an unusual situation: a tax designed to generate billions for the state could soon start costing it money instead.
