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Denmark scraps popular tax deduction for home improvements

A tax deduction for home improvements, the “håndværkerfradrag”, is to be scrapped in 2022 after parties agreed to end it in next year’s budget.

A popular tax subsidy for home improvements, the
A popular tax subsidy for home improvements, the "håndværkerfradrag", will end in Denmark on April 1st 2022. Photo: Signe Goldmann/Ritzau Scanpix

The government, along with its left wing allies Red Green Alliance, Social Liberals and Socialist People’s Party; and minor parties Alternative and the Christian Democrats, presented the 2022 budget on Monday, including an agreement to drop the home building subsidy.

Sofie Carsten Nielsen, leader of the Social Liberals, said “we are dropping the building subsidy that has ignited the already overheated housing and construction market”.

READ ALSO: Four ways to (legally) lower your tax bill in Denmark

The tax deduction will be removed from April 1st next year. Other tax deductions that can be applied for home services, including cleaning and childcare, are retained.

Tax subsidies for people who hire services in their homes, termed boligjobordningen, were broadened last year as part of government measures to support the economy during the coronavirus crisis.

The provision allowed for a higher tax deduction for the encompassed home services.

Demand for builders has since increased so dramatically that supply can no longer meet demand. As such, the parties behind the budget deal reason that the deduction is no longer needed.

Additionally, the Danish central bank, Nationalbanken, has warned that high demand could contribute to an overheating of the housing market.

Although the deduction was adjusted five years ago to favour green home improvements, the government’s allied parties still maintained they wanted to scrap it.

Nielsen said on Monday that the deduction has put Denmark’s building trade under strain.

“This is an economically responsible budget which also contains huge green decisions,” the Social Liberal leader said.

Finance Minister Nicolai Wammen said that the deduction would remain applicable to other trades, including cleaning, in order to prevent cash-in-hand arrangements.

“The biggest challenge we have in regard to the Danish service industry is in building and extensions. That’s why we are revoking the building element of the (subsidies),” Wammen said.

“But we are very concerned with keeping down cash-in-hand work in the service sector,” he added.

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POLITICS

Denmark finalises 2022 budget agreement

A one-off investment in the health service, free dental services for young people and the end of a tax subsidy for home improvement are among prominent details of Denmark’s 2022 budget.

Government and party representatives present Denmark's 2022 budget agreement in Copenhagen on December 6th.
Government and party representatives present Denmark's 2022 budget agreement in Copenhagen on December 6th. Photo: Mads Claus Rasmussen/Ritzau Scanpix

Denmark’s 2022 budget agreement was presented on Monday morning after a short delay on finalising next year’s finance law.

The government, along with its left wing allies Red Green Alliance, Social Liberals and Socialist People’s Party; and minor parties Alternative and the Christian Democrats, presented the budget on Monday.

“We are protecting our welfare. Money has been set aside for our schools, children and elderly,” Finance Minister Nicolai Wammen said according to broadcaster DR.

Young people aged 18-21 years will receive free dental care under the new budget, while a popular tax subsidy for home improvements, the håndværkerfradrag, is to be scrapped.

Red Green Alliance (Enhedslisten) lead political spokesperson Mai Villadsen called free dental care for young people “a strong right of welfare”.

Sofie Carsten Nielsen, leader of the Social Liberals, said “we are dropping the building subsidy that has ignited the already overheated housing and construction market”.

Meanwhile, a limit is to be set on the number of children per class in grades 0-2 at state elementary schools.

No more than 26 children will be allowed in a class.

Following weekend negotiations, the parties behind the deal earlier revealed that it would include a significant one-off investment in the public health service, which has come under increasing strain due to factors including the Covid-19 pandemic and industrial disputes, notably between nurses and the government.

The deal means a billion kroner has been set aside for additional spending in extraordinary circumstances, and will be used to retain health sector staff and boost hospital capacity.

The money is to be distributed to the regional authorities who can decide how to spend it, DR writes. As such, it is currently unclear how the spending will resolve issues such as treatment backlogs and staff shortages.

In the budget, the parties also pledge to double energy production from wind farms by 2030, compared to current levels.

Parliament usually votes through the next year’s budget in December, but proposals are normally tabled in early autumn – the original proposal for 2022 was presented at the end of August

This is because Denmark is ruled by minority governments or coalitions, which must seek and negotiate support from other parties to pass laws.

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