According to TV2, the Danish government has announced its grand plan in the upcoming Finance Bill, revealing that Denmark, which is among the countries with the highest electricity tax in Europe, will reduce the tax from 72.7 Øre per kilowatt-hour before VAT next year, to the minimum allowed by the European Union of just 0.8 Øre, during the years 2026 and 2027.
Prime Minister Mette Frederiksen confirmed in an interview with TV2 that this decision will have a direct and tangible impact on all Danish families, explaining: “This is something that every Danish household will feel.”.
Electricity tax reduced to the European minimum for two years
Liberal Party leader Venstre and Defense Minister Troels Lund Poulsen expressed his satisfaction with the decision, saying: “The people who will benefit the most are those with limited incomes, because they spend a larger percentage of their disposable income on taxes.”.
Prices in Denmark are 19% higher than the EU average.
The announcement came after a recent interview with Mette Frederiksen in the newspaper Politiken about rising food prices, during which she revealed that the government would be considering tax cuts in next year's budget. According to TV2, the government is also considering reducing taxes on coffee and chocolate, at a time when Danish statistics show that domestic prices are 191 TP3T higher than the EU average, with only Luxembourg having higher prices.
The Prime Minister added: “We have succeeded in controlling inflation, but citizens do not feel this when shopping, as the prices of some food items have risen significantly, and this is what we are trying to address,” according to TV2.
Providing thousands of kronor to families and pensioners and increasing purchasing power
Foreign Minister and Moderate Party leader Lars Løkke Rasmussen explained that reducing the electricity tax will not make beef cheaper, but it will increase purchasing power by reducing the electricity bill. He told TV2: “Electricity will not make steak or cream cheaper, but I will notice that my electricity bill is lower, and this enhances my purchasing power.”.
According to government estimates, a working family will save around 4,000 kronor per year, while a retired couple will save around 2,700 kronor.
Social assistance recipients will save around 1,000 kronor, according to the Ministry of Finance's calculations, which indicated that purchasing power will rise between 0.4 and 0.8%, according to the source.
This move is estimated to cost the state treasury around 7 billion kronor annually, or 14 billion kronor over two years. According to TV2, Troels Lund Poulsen said, "If it were up to me, I would abolish the tax permanently," but he indicated that the current decision represents an "extraordinary investment" to combat rising commodity prices.
Controversy surrounds the plan's impact, oscillating between support for purchasing power and environmental criticism.
Denmark had tried reducing the tax to the same level in 2023 as part of a winter aid package following the Russian invasion of Ukraine. Although citizens were relieved, environmental organizations such as Green Power Denmark expressed concern. Its director, Kristian Jensen, told DR: “Electricity is more carbon-neutral than other energy sources, so it was regrettable that the tax was raised again.”.
However, Lars Løkke Rasmussen believes that “the electricity tax is a fair tool, because it includes all citizens, as everyone has an electricity bill,” according to TV2.
Potential accusations of "electoralism" as elections approach
But with municipal elections approaching in November and parliamentary elections later on, some are wondering if the decision has electoral motives.
According to the source, Mette Frederiksen responded by saying: “No, that is not the reason. This step should be seen as part of a series of measures we have taken to put more money in the hands of citizens.”.
Troels Lund Poulsen commented: “No matter what any government does, there will always be those who think it’s electioneering. We are doing what we think is right.”.
Mette Frederiksen concluded by saying that the government is listening to what people are going through: “When you stand in line at the supermarket and hear the same complaint: Have you seen the prices? We are fully aware that this is putting pressure on ordinary families, especially pensioners and those with limited incomes,” according to TV2.
The full draft budget law is scheduled to be submitted in the coming days, as the Minister of Finance must formally present it before August 31.
