Danes love their high taxes

And they will not tol­er­ate politi­cians who seek cuts. This stems from a proudly pre­served cul­ture of equal­ity

The Hindu Business Line - - THINK - NI­CHOLAS RIGILLO / PETER LEVRING BLOOMBERG

Its ci­ti­zens pay some of the high­est taxes in the world, so an ad­min­is­tra­tion that prom­ises to slash them should be on to the po­lit­i­cal equiv­a­lent of a slam dunk.

Not in Den­mark, where such a pro­posal has been met with strong op­po­si­tion and a drop in sup­port for Prime Min­is­ter Lars Loekke Ras­mussen’s cen­tre-right gov­ern­ment.

The gov­ern­ment’s plan in­volves cut­ting the top rate of in­come tax by 5 per­cent­age points and rais­ing per­sonal al­lowances so as to boost the salaries of the low­est earn­ers by an av­er­age of 7 per cent.

Those with gross an­nual salaries above 1 mil­lion kroner ($151,000) would con­tinue to pay a top rate of 58.3 per cent. The main idea be­hind the change, which is now be­ing dis­cussed by par­lia­ment, is to make salaried work more at­trac­tive and woo some 40,000 peo­ple off wel­fare in the process.

Not a bad plan for a coun­try that faces labour short­ages and grow­ing pres­sure on its costly so­cial safety net from an age­ing pop­u­la­tion.

De­ci­sive role

“It’s our firm con­vic­tion that taxes plays a de­ci­sive role in how much peo­ple are pre­pared to work,” Fi­nance Min­is­ter Claus Hjort Fred­erkisen told Bloomberg in a re­cent in­ter­view.

In ad­di­tion to the tax cuts, the long-term unem­ployed would be re­warded with a 30,000-krone bonus ($4,500) for ac­cept­ing a job if they’ve been on ben­e­fits for more than a year.

Gov­ern­ment cal­cu­la­tions sug­gest the balance of the pro­posed changes would put more than 2,000 kroner ($300) a month into the pock­ets of 100,000 peo­ple who will be pushed into work­ing more.

The plan would be funded by re­duc­ing in­ter­est rate pay­ment de­duc­tions, cut­ting green in­cen­tives and cap­ping stu­dent sup­port as well as child sup­port in large fam­i­lies.

To the unini­ti­ated, the polls don’t a Fer­rari around Copen­hagen isn’t con­sid­ered cool.

The sec­ond is prac­ti­cal. Danes trea­sure their wel­fare state and are fully con­scious of the fact that it costs money. High taxes en­sure that “any­one who ends up in eco­nomic trou­ble or bad health is taken care of”, says Rene Christensen, a mem­ber of the Dan­ish Peo­ple’s Party who heads par­lia­ment’s fi­nance com­mit­tee.

Ac­cord­ing to Rune Stubager, a pro­fes­sor of po­lit­i­cal sci­ence at Aarhus Univer­sity, the prob­lem with the gov­ern­ment’s plan is that it’s es­sen­tially ask­ing Danes to choose be­tween pre­serv­ing their beloved wel­fare state and pay­ing a lit­tle less tax. “That’s an easy choice to make, par­tic­u­larly when a cut to the top mar­ginal rate ben­e­fits only a small group of vot­ers,” he said.

As the lo­cals like to re­mind them­selves, Den­mark reg­u­larly tops the in­ter­na­tional rank­ings on both wel­fare and hap­pi­ness. Per­haps it’s no co­in­ci­dence then that their word for taxes, skat, also means sweet­heart.

Based on sound prin­ci­ples

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.