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ENERGY

Denmark’s tax authority considers commuter subsidy over high fuel prices

People who commute long distances to work in Denmark could be offered an improved tax subsidy as a result of soaring fuel prices.

High fuel prices in denmark
The price of petrol in Denmark is higher than ever, prompting tax authorities to consider a commuter subsidy. Photo: Ólafur Steinar Rye Gestsson/Ritzau Scanpix

The government organ Skatterådet, a tax council whose responsibilities include deciding certain subsidy rates, is to discuss a potential change to the tax subsidy given to commuters who travel over a certain distance to work, kørselsfradraget, trade union publication Fagbladet 3F reports.

Financial assistance for commuters in the form of a higher subsidy is not likely to take effect imminently, however, according to the report.

“The Tax Council can decide extraordinarily to change the subsidy rates,” read a written comment from the council to 3F.

“The chairperson of the Tax Council, Jane Bolander, has asked the Tax Council its next (meeting) to more generally present the development of petrol prices in relation to the (commuting subsidies),” it said.

“Any adjustment to the rates would be decided a later meeting,” it said.

The commuter deduction, termed kørselsfradraget in Danish, is designed to cover the cost of travelling to and from work over a set minimum distance. It applies to rail and car journeys alike. The deduction is always calculated based on kilometres travelled if the journey was made by car, even if it was actually made by train.

Commuters can claim the deduction if they travel over 24 kilometres to get to and from work over (12 kilometres each way). 

An equivalent tax relief for commuters who use their private vehicles to get to work, the befordringsgodtgørelse, is also being considered by the Tax Council.

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The Tax Council is next scheduled to meet on March 22nd, according to its website.

FDM, an interest organisation for motorists, welcomed the possible change to the subsidy.

“The pain threshold for commuters was reached when the price of a litre of petrol already at the turn of the year was one krone above what the Tax Council’s rates are based on,” FDM’s consumer economist Ilyas Dogru told news wire Ritzau in a written comment.

“With record-high petrol prices expected to continue all year, we thin the Tax Council should correct the rate with retroactive effect,” he said.

Petrol prices have increased considerably in Denmark following the Russian invasion of Ukraine, due in part to European discussions of a possible ban on Russian oil imports.

On Tuesday, the list price for a litre of petrol in Denmark was just under 17 kroner. Many petrol stations set their prices slightly lower than this list price to attract customers. A price of around 15.89 kroner per litre could be observed at most petrol stations on Wednesday morning.

Just five months ago in October 2021, a consumer price of 13.99 kroner per litre was reported to be Denmark’s highest-ever petrol price.

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ENERGY

Denmark to reduce electricity tax in 2022 and 2023

A majority in the Danish parliament has agreed to reduce the amount of tax charged on electricity, beginning this year.

Denmark to reduce electricity tax in 2022 and 2023

The deal was presented on Friday in the form of a political agreement between enough parties to vote it through parliament.

The reduced electricity tax, which will be temporary, is expected to cost the Danish state 475 million kroner and is part of a wider deal which aims to compensate the public for increasing living costs.

Tax on electricity will be eased by 4 øre per kilowatt hour for the last three months of 2022 (1 øre is one hundredth of a krone), and by 4.3 øre per kilowatt hour in 2023.

As such, the electricity tax rate will be 72.3 øre per kilowatt hour for the last quarter of 2022, and 68.8 øre per kilowatt hour throughout 2023.

Electricity taxes were already scheduled for reduction under the terms of a 2018 political agreement.

Prior to Friday’s agreement, the plan was for electricity tax to fall from 76.3 øre per kilowatt hour in 2022 to 63.9 øre per kilowatt hour in 2025.

The temporary cuts announced on Friday are separate from that deal and mean that the tax will be lower than planned in 2023, but will rise at the beginning of 2024.

Friday’s agreement also includes provisions to increase tax subsidies for people in employment and to give a one-off lump sum of 5,000 kroner to elderly people who receive the ældrecheck welfare benefit.

The overall cost to the state of the deal is 3.1 billion kroner.

Parties from both sides of the political aisle have pledged to back the agreement in parliament. They include the Socialist People’s Party (SF), the Red Green Alliance, Social Liberals (Radikale Venstre), Conservative and Liberal parties along with the Social Democratic government.

The increasing cost of energy is cited in the agreement as the primary reason for the necessity of the deal.

The Danish Chamber of Commerce praised the political agreement in comments to news wire Ritzau.

“A reduced electricity tax means both consumers and businesses get an incentive to switch to green electricity,” the interest organisation’s director Brian Mikkelsen said.

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