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BUDGET

Up to €500 million in tax cuts on the way

Chancellor Angela Merkel’s centre-right coalition will likely reduce the tax burden for citizens by up to €500 million as part of its plan to simplify the German fiscal system, a media report said on Wednesday.

Published: 1 September 2010 08:43 CEST
Up to €500 million in tax cuts on the way
Photo: DPA

The sum would be the upper limit, coalition insiders told daily Passauer Neue Presse.

The new measures, set to be presented within the year, will address some 50 different aspects of the tax code, the paper said.

By 2013 the Finance Ministry would begin issuing preliminary tax returns to taxpayers, who could then choose to amend them if necessary, instead of having to file themselves each year.

Taxpayers will also see the simplifications in deductions for items such as child care costs.

During talks between the Finance Ministry and finance policy experts from Merkel’s conservative Christian Democrats (CDU) and their junior coalition partners the pro-business Free Democrats (FDP), the two sides showed “a high level of consensus,” according to parliamentary liaison to the Finance Ministry Hartmut Koschyk.

Ideas from state finance ministries, the coalition parties and the Federal Finance Ministry are all included in the plan, the paper said.

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TAXES

Beskæftigelsesfradraget: What is Denmark’s employment allowance?

Denmark's government may soon announce changes to its tax reform plans, which will give all wage earners a bigger employment allowance. What is this and how will it affect foreigners' earnings?

Published: 30 October 2023 15:21 CET
Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance? 

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes. 

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner. 

How did the government agree to change the employment allowance in its coalition deal? 

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment  allowance to 12.75 percent up to a maximum rebate of 53,600 kroner. 

How might this be further increased, according to Børsen? 

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance. 

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement. 

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.  

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