The government announces upcoming tax cuts, and the plan faces significant criticism, most notably...
Economy Minister Troels Lund Poulsen announced that the government will reduce personal income taxes by 10 billion kroner as part of the upcoming tax reform, according to TV2 and Ritzau on Sunday. (To find out the approximate tax reduction for your personal income, click on the link below the article).
Introducing ethnic minorities into the labor market
In addition to the tax cuts, the minister also announced that the government would introduce further measures to increase the labor supply: “This could be through more effective recruitment efforts, and it could be through increasing the number of people from different ethnic backgrounds who become part of the labor market,” according to the source.
Criticism of the government's plan
The government will work to increase the labor supply by a total of 45,000 additional people until 2030. However, this announcement has been met with criticism as, at the moment, only concrete decisions and plans have been made, which could provide an additional 29,000 full-time employees. How to find the last 15,000 people – preferably three times that number – is largely unclear, according to criticisms from the business world regarding the government's announcement of its plan.
However, according to the Danish Industry Association (Dansk Industri), the labor shortage in Denmark exceeds 100,000 people (compared to only 45,000 in the government's announcement). Therefore, according to Lars Sandal on TV2, it is difficult to see how the government will be able to improve social welfare through the initiatives on the table.
The Finnish Liberal Party considers the tax cuts a major victory.
According to the source, commentator and political expert Hans Rieder points out that the Liberal Party (of the right-wing Blue Bloc), to which Economy Minister Troels Lund Poulsen belongs, considers the tax cuts a major victory, as the party has long promised voters to reduce taxes. This is strongly opposed by parties in the Red Bloc, who argue that tax cuts will harm Denmark's welfare state. The party also needs to provide its voters with a reason for being part of the current government coalition, which it entered into with its historical arch-rival, the Social Democratic Party, according to the expert.
Although the Liberal Party considers this a victory because it represents the largest tax cuts in the last ten years, if we look back to 2012, we find that the government of Helle Thorning-Smådt (the former leader of the Social Democratic Party and former Prime Minister) implemented a tax agreement that included much larger tax cuts than those referred to by the Liberal Party and the current government, according to Hans Rieder, who said: “It is objectively true that no major tax cuts have been implemented in the last ten years, but if you say over the last 12 years, a Social Democratic government has delivered much larger tax cuts than what the Liberals are now trying to sell as a major victory for themselves,” according to the source.
Approximate examples of how much personal income tax might change:
According to TV2, here are four approximate examples of tax reforms:
- Annual income 300,000 Danish kroner: The person concerned can expect a tax reduction of approximately 1,600 Danish kroner per year.
- Annual income 450,000 Danish kroner: The person concerned can expect a tax reduction of approximately 2,900 Danish kroner per year.
- Annual income 750,000 Danish kroner: The person concerned can expect a tax reduction of approximately 11,700 Danish kroner per year.
-An annual income of 3,000,000 Danish kroner: A person can expect an additional tax bill of 12,100 Danish kroner per year. The person receives tax relief from the fact that the maximum limit for the employment deduction and the tax credit on the highest taxable income has been raised to 750,000 Danish kroner. Conversely, there will be an increase in tax on income exceeding 2.5 million. Overall, this results in paying additional tax. - Special benefits for single parents: The government tax plan allocates funds to increase the extra tax credit (ekstra beskæftigelsesfradrag) that single parents are entitled to. For a single parent with an annual income of 300,000 SEK, this translates to an annual tax reduction of 3,000 SEK, compared to 1,600 SEK in the example above.
- A reserve for negotiation of approximately 500 million Danish kroner: Of the 6.75 billion Danish kroner the government wants to spend on tax cuts, 500 million dollars have been set aside for negotiations.
As a starting point, parties outside the government could use $500 million for further tax cuts. This might mean some of the above criteria change more significantly, but it could also mean tax cuts in entirely different areas.
