Danish government announces major plan to cut income tax

Ritzau/The Local
Ritzau/The Local - [email protected]
Danish government announces major plan to cut income tax
Danish Economy Minister Troels Lund Poulsen has given details of the government's proposed reforms to income tax prior to a formal presentation on Monday. Photo: Mads Claus Rasmussen/Ritzau Scanpix

Taxes to personal income are to be cut by up to 10 billion kroner in a new reform proposed by the Danish government.


An upcoming tax reform will propose cuts to personal income taxes amounting to some 10 billion kroner, Economy Minister Troels Lund Poulsen said on Sunday.

“I’m pleased that we can now make the largest cut to taxation on work for ten years. It’s a pat on the back for working Denmark that we are now easing tax on work by ten billion kroner,” Poulsen told news wire Ritzau.

Some 3.3 million working people in the country will see their taxes reduced as a result of the reform according to the government.

The reform also aims to increase the number of jobs on the labour market by 5,150 people by 2030.

“This is recognition of all the people who go to work in the private sector and in the public sector, and who help our excellent society to keep going,” Poulsen said.


“At the same time it makes it more rewarding to work and will provide more labour to our business and our welfare system, which is in acute need of more people,” he said.

The proposed reform includes a 500 million kroner “negotiation reserve”, allowing the government to negotiation with other parties in parliament over how that portion of tax revenue should be spent. It has not been designation any specific area in the initial proposal.

The 10 billion kroner described by the proposal do not represent the exact amount by which the government’s tax revenue will change under the reform.

That is because the government expects the tax cuts to generate spending by consuming, which in turn gives tax revenue back to the state in the form of taxes like VAT (moms in Danish).

As such, the government calculates its overall loss of revenue will be 6.75 billion kroner if the proposed reform is adopted.

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The government’s policy paper, which was agreed between the three coalition parties when they took office in December last year, stated a plan to cut taxes by five billion kroner.

But the so-called råderum or leeway in the state budget has allowed for that amount to be raised, the government has said.

Specifically, the reform will increase the income tax deduction given to people in employment, beskæftigelsesfradraget. An additional tax cut will be given to single-parent families.

READ ALSO: Beskæftigelsesfradraget: What is Denmark's employment allowance?

The highest rate of tax, topskat, will be halved for persons whose annual income is under 750,000 kroner, meaning they will pay a rate of 7.5 percent on income that falls into the topskat bracket, instead of the regular 15 percent.

The government also proposes adding a new bracket of tax for the very highest earners, often referred to in Danish as toptopskat, literally “top-top-tax”. The new bracket will apply to people with annual incomes over 2.5 million kroner.

Poulsen said he hopes the reform can be agreed and adopted in parliament in time to introduce new tax rates from 2025.


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