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Low tax for highly educated foreigners to be extended: ministry

Danish Minister for Industry, Business and Financial Affairs Brian Mikkelsen intends to extend the coverage period of the low tax rate for highly educated foreigners, in a move welcomed by the Confederation of Danish Industry.

Low tax for highly educated foreigners to be extended: ministry
Minister for Industry, Business and Financial Affairs Brian Mikkelsen: Photo: Uffe Weng/Scanpix

The Danish government is expected to present a comprehensive business plan that will make life easier for companies in Denmark within the next few weeks.

Minister for Industry, Business and Financial Affairs Brian Mikkelsen has already announced in Danish newspaper Berlingske Tidende that he will expand the so-called ‘research tax scheme’, writes dibusiness.dk.

Today, the scheme allows highly paid foreigners to work for five years in Denmark under a special tax rate of 26 per cent plus labour market contributions. 

According to the proposal from Brian Mikkelsen, the scheme would be expanded so that foreigners would be able to spend seven years under the low tax rate, which will meanwhile be raised by one per cent, making the expansion cost neutral for the government. 

The Confederation of Danish Industry (Dansk industri, DI) supports the initiative.

“It is a very sensible proposal. Firstly, because companies have a great need for highly skilled labour, and this proposal will make it easier to attract and retain employees. Secondly, because an extension of the scheme will increase the chance of foreigners staying in Denmark even once they are no longer covered by the scheme,” said Deputy Director Kent Damsgaard of the Confederation of Danish Industry. 

Many highly skilled foreigners currently leave Denmark once they have to pay full taxes. 

According to a study from DI and DEA from 2016, the average period of residency is just 3.5 years for a foreign citizen who has come to Denmark under the research tax scheme.

READ ALSO: Foreigners fill more than half of all new jobs in Denmark

That is one of the reasons why an extension of the scheme was included among the recommendations that DI presented to the government earlier this year. 

“Without the scheme, many would not come at all. And this type of employee is absolutely crucial in order for large Danish companies to be at the forefront of global competition. They thereby create jobs for many others and that value far exceeds the tax revenue that would come from taxing them on equal footing with Danes,” Damsgaard said.

The director added that he was looking forward to the ongoing process, in which DI hopes that several more of its proposals for adjustments can be met.

“For example, as a foreigner, you are excluded from the scheme if you have earned even the slightest amount of taxable income in Denmark within the past 10 years. But it is precisely people like this, who have already experienced Denmark, who are most likely to try out a permanent job here. Moreover, it does not make sense that the scheme prevents foreign entrepreneurs and owner-managers from moving their company to Denmark and taking advantage of the scheme. We need those people as well,” he said. 

READ ALSO: Jobs vacant in Denmark with unemployment low: report

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Labour shortage hits half of Danish companies in construction sector

A record-high shortage of labour at some Danish companies is exacerbated in some places by a lack of materials, according to new data.

A file photo of construction in Aalborg. As many of half of construction companies in Denmark currently report a lack of labour.
A file photo of construction in Aalborg. As many of half of construction companies in Denmark currently report a lack of labour. Photo: Henning Bagger/Ritzau Scanpix

The construction industry reports a lack of labour at around half of all companies, according to a survey by Statistics Denmark, based on responses from businesses.

In the service industry, which includes restaurants, hotels and cleaning, one in three companies reported a lack of workforce.

Some industries, notable machinery related businesses, also said they are short of materials currently.

The lack of labour is holding the Danish economy back, according to an analyst.

“Never before have we seen such a comprehensive lack of labour in the Danish economy,” senior economist Søren Kristensen of Sydbank said.

“It’s a shame and it’s a genuine problem for a significant number of the businesses which at the moment are losing revenue as a consequence of the lack of labour,” Kristensen continued.

“That is costly, including for all of Denmark’s economic growth. Even though we on one side can be pleased that it’s going well for the Danish economy, we can also regret that it could have been even better,” the economist said in a comment to news wire Ritzau.

Despite the lack of labour, businesses have their most positive outlook for years, according to Statistics Denmark.

The data agency based its conclusions on a large volume of responses from companies related to revenues, orders and expectations for the future.

The numbers are processed into a measure termer business confidence or erhvervstillid in Danish. The October score for the metric is 118.7, the highest since 2010, although there are differences between sectors.

READ ALSO: Are international workers the answer to Denmark’s labour shortage?

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