Denmark’s tax authority sends thousands of ‘friendly reminders’ before Christmas

Thousands of taxpayers in Denmark will receive a reminder letter in their mailboxes this week but they shouldn’t expect it to contain a Christmas greeting.

Denmark’s tax authority sends thousands of 'friendly reminders' before Christmas
The Danish Tax Authority is to send thousands of 'friendly reminder' letters before Christmas to people who are due to make payments in January. File photo: Thomas Lekfeldt/Ritzau Scanpix

The Danish Tax Authority (Skattestyrelsen) is sending reminder letters in the days before Christmas to up to 152,000 people who pay B-skat tax or have outstanding tax payments (restskat) due for payment in January.

It sounds like a policy thought up by Ebenezer Scrooge himself, but the agency says the letters are part of new measures to help prevent late payments and smooth the process for people who are responsible for their own tax returns.

The reminder letters are sent either digitally to secure mailboxes or by physical post.

While people who are employed have income tax automatically deducted from their monthly wage, self-employed people and freelancers generally enter their earnings and pay tax themselves using the B-skat system.

The Tax Authority said in a statement that it hoped the timely letters would encourage more people to register for the direct betalingsservice via their online banks, meaning their monthly taxes are drawn automatically from their bank accounts.

The pre-Christmas letters are intended as a “friendly reminder — a form of service letter” and are not a demand for immediate payment, Tax Authority deputy director Rikke Busk Ginnerup stressed.

“We hope sending the letters will give a closer dialogue with the public so we can help individuals along the way if they want to make repayment arrangements for outstanding taxes or with changes to their preliminary returns [forskudsopgørelse, ed.] in connection with payment of B-skat,” Ginnerup said in the statement.

READ ALSO: Forskudsopgørelse: Why checking your preliminary Danish tax return matters

The service letters are part of an overall campaign by the tax agency to improve assistance for taxpaying businesses and individuals.

Flexible payment options should also make it easier to pay taxes and fees on time, the tax agency said.

“These many letters are an attempt to help the public to do things correctly,” Ginnerup said.

“Tax isn’t easy for many people. We know this and that’s part of the reason why we’re here,” she said.

Outstanding tax, restskat in Danish, is the amount of tax that remains to be paid on an annual income. Final outstanding tax for the year can be seen in March, when the final tax return or årsopgørelse is published and accessible for all individual taxpayers in Denmark by logging into the website.

If too much tax has been paid throughout the year, this results in overskydende skat (surplus tax) as opposed to restskat, and the taxpayer receives an automatic rebate.

READ ALSO: Årsopgørelse: What you need to know about Denmark’s annual tax return

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Danish government accused of breaking promises on tax cuts

Critics of the Danish government say it is failing to meet promises on tax cuts made in the coalition policy agreement because of a plan to apply a special tax to energy firms and use it to assist individuals struggling with high living costs.

Danish government accused of breaking promises on tax cuts

The criticism has emerged from the recent announcement that energy companies are to be required to pay a special tax contribution totalling 1.2 billion kroner due to additional revenues resulting from the energy crisis. The special tax is connected to an EU measure aimed at relieving high energy prices for consumers.

The money will be spent by the state on support for members of the public who are struggling with costs caused by inflation. This will funnel it back to consumers, the government argues.

READ ALSO: Danish energy companies ordered to return 1.2 billion kroner

“That is not what you would normally think to be a tax freeze,” economy professor Bo Sandemann Rasmussen of Aarhus University said in comments to newspaper Berlingske.

In December’s coalition policy agreement, the government states that its tax policies will be “be based on tax freeze” (skattestop).

The term skattestop has been a key part of tax policy within the Liberal (Venstre) party, one of the two junior partners in the coalition, for over two decades.

The government suggested it will use a fund of 300 million kroner previously set aside for a temporary subsidy for vulnerable families in order to meet its tax promises.

It also wants to give inflation-related tax-free cash payments to low-income senior citizens who receive the ældrecheck welfare benefit.

READ ALSO: KEY POINTS: What are the main policies of the new Danish government?

But these plans do not fit with a “tax freeze” in the traditional sense, Rasmussen said to Berlingske.

“Normally you would say this [a tax freeze] should happen within the tax system. In other words, via either direct taxation of people’s incomes or through indirect taxes like VAT,” he said.

In September, the European Commission asked member countries to implement plans to cap to energy company profits. These, as well as levy collections from fossil energy companies, were expected to raise 140 billion euros.

The policy was a key element of the Commission’s measures to relieve high energy prices for consumers.

Tax Minister Jeppe Bruus noted in a comment that the EU had required the Danish government to apply a special tax, news wire Ritzau writes.

“This is therefore a proposal that is the consequence of a regulation that took effect before the new government was in place,” Bruus said.

“The policies the government has presented mean, overall, that taxes will be considerably reduced,” he stated.

Negotiations with other parties could determine the way in which the money regained from energy companies is spent – and therefore whether it takes the character of tax cuts.

The Liberals said they stand by their “tax freeze” principle.

“We naturally stand by the tax freeze and want to reduce tax by billions for both Danes and Danish companies. The EU has – before the coalition was formed – required Denmark to implement [caps on energy companies],” Liberal tax spokesperson Jan E. Jørgensen said in a written comment.

“At the same time, there are a number of criteria from the EU on what the proceeds from these measures can be used for and what they may not be used for,” he added.

The libertarian thinktank Cepos accused the government of breaking promises to reduce tax and rejected its argument relating to the EU regulation.

“According to the tax ministry, the proceeds from tax increases [on energy companies] can go to things like measures to relieve the consequences of high electricity prices for consumers,” Cepos senior economist Mads Lundby Hansen told Ritzau.

“Lower electricity taxes reduce electricity prices, so I therefore see no obstacle to the government, for example, reducing the electricity tax and thereby complying with its tax freeze,” he said.