Policy Reversal For Denmark As Government Forced To Consider Income Tax Rate Cuts

by Ulrika Lomas, Tax-news.com, Brussels

23 May 2001

Denmark's Minister of Economic Affairs, Marianne Jelved, has revealed that the government is seriously considering lowering income tax rates. For months the Danish government has vigorously opposed any suggestions to reduce the tax rate and Ms Jelved's announcement represents a complete 'u-turn' in policy for the government.

According to a report from the Copenhagen Post online news service, economists and officials from the European Union have consistently advised the government to drop its tax rate but until now their pleas had fallen on deaf ears. After reports that Denmark's economic growth is expected to slow down over the next two years by such a considerable rate that it will be among the lowest in Europe, Ms Jelved has admitted that lowering income tax could be the government's only way forward.

She conceded that Denmark's human resources, currently at full capacity, will present a major problem for the economy in the near future. To reach the government's aim of cutting the national debt by 50%, the number of workers is required to increase by 85,000 over the next ten years but this figure will never be realised if the workforce continues to rise at its current rate without government intervention.

Concerned with a diminishing workforce, Ms Jelved said: 'The government has set money aside to counteract not only international tax competition, which could attract skilled workers to travel abroad, but also to combat the problem of supply and demand in the workforce. We're ready with proposals that will make it more attractive to work.'

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