Prime Minister Lars Løkke Rasmussen plans to invite all of parliament's parties to negotiations on tax reform when the parliamentary season opens in October, but there are already rampant rumours that the talks will fail and he'll be forced to call for a new election.
Rasmussen's minority Venstre party relies on the support of the Conservatives, the Danish People's Party (DF) and the Liberal Alliance (LA). The latter party has drawn a line in the sand and has promised to pull its support of the government if its demand of a five percent decrease on the upper tax bracket isn't met.
LA has long said that its top priority is a significant decrease on topskat, a 15 percent tax paid by those who earn over 459,200 kroner ($69,000, €61,700) per year on top of other income taxes. Around 500,000 people are in the highest tax bracket.
LA's leader Anders Samuelsen has said that while his party would prefer to scrap the tax altogether, it would settle for cutting the rate in half to 7.5 percent. If it can't get that, it will demand that the rate drop by five percent. That, Samuelsen said, his his “red line”.
In a long post to his Facebook followers, Samuelsen stressed that five percent was his party's “minimum requirement”.
“Now you know where we stand, if you didn't already,” he wrote.
When a Facebook follower asked if the party would pull its support from the Venstre government and thus force an election if it didn't get the five percent cut, he wrote that “the answer is yes”.
But DF, which is the government's largest support party, argues that Denmark cannot afford to cut taxes until the nation gets control of the costs associated with asylum seekers. It also doesn't want to lose voters to the Social Democrats by supporting tax cuts that would appear to undermine DF's support of a robust welfare system.
That, according to commentators, puts Rasmussen in a bind.
“The government needs to untangle a Gordian Knot. Because all parties – both blue and red – have taken very hard lines ahead of the negotiations,” political commentator Hans Engell told news agency Ritzau.
Engell said that Rasmussen could very likely enter into a tax reform agreement with DF and the Social Democrats that would allow its plan to pass without the support of LA. That would then force Samuelsen to make good on his threats or lose face.
“Liberal Alliance has tied itself to the mast for topskat reductions. Liberal Alliance will have no credibility left if the party leaves the negotiating table without changes to the top tax rate,” Engell said.
Political commentator Henrik Qvortup told Metroxpress on Monday that Samuelsen has painted himself into a corner that can only end with forcing a new election.
“The Danish People's Party won't tolerate sending so many voters into the arms of Mette Frederiksen and the Social Democrats. It's not going to happen. We will have an election and Samuelsen will enter the floor of parliament with his vote of no confidence in the government,” Qvortup said.
“If Samuelsen doesn't topple Løkke [in the absence of the five percent tax cut, ed.], you won't be able to find an example of a politician who has lost more face than Samuelsen. He would be a joke,” he added.