The reform, known in Danish as udligningsreformen, was agreed upon in May this year by a cross-aisle coalition of parties and sets out to recalibrate state spending across municipalities.
Municipalities which lose out due to the reform can increase municipal income (kommuneskatten in Danish) taxes and keep the extra tax revenues. 15 out of 26 affected municipalities have chosen to do just that, the Ministry of Social Affairs has confirmed in a statement.
The 15 municipalities are: Aarhus, Gentofte, Rudersdal, Roskilde, Horsens, Helsingør, Skanderborg, Hillerød, Greve, Hørsholm, Lejre, Solrød, Vallensbæk, Lyngby-Taarbæk and Fanø.
Zoom in on the map below to see the names of the municipalities.
Municipal tax is the personal income tax which covers municipal services. The amount paid by individuals is dependent on the municipality in which they live and municipalities generally decide their own rates within limits set by the government. As a result, the municipal tax rate can range between about 22 and 27 percent depending on address. The average municipal tax rate in 2019 was 24.93 percent.
Municipal tax is added to two other basic taxes, AM-bidrag and bundskat, as well as topskat for high earners, to calculate an individual’s overall income tax payment.
May’s political agreement allows municipalities to opt to increase their taxes if they are set to lose out due to reformed state spending. 236 million kroner in taxes will be collected by the municipalities in 2021 in this way, out of a maximum 430 million kroner provided for by the framework.
Mayors in affected municipalities have previously said they had a straight choice between raising taxes or cutting services in response to the reform.
The extra tax revenue each individual municipality is allowed to collect can be seen via the social ministry’s website.
Municipalities will set their tax rates as part of the national budget, which is scheduled for October this year.
Meanwhile, 12 municipalities have applied to increase taxes outside of the provisions of the recalibration agreement. This is currently being assessed by the Ministry of Social Affairs.
The 12 municipalities in question are Hillerød, Vallensbæk, Gentofte, Hørsholm, Greve, Lyngby-Taarbæk, Helsingør, Rudersdal, Fanø, Dragør, Hjørring and Lolland.