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DEBT CRISIS

Rösler promises tax cuts for 2013

Economics Minister Philipp Rösler has reiterated his commitment to tax cuts in 2013, despite the government's struggles to balance its budget.

Rösler promises tax cuts for 2013
Photo: DPA

“The detailed measures will be decided in time for the 2012 budget, and will come into force on January 1, 2013,” the leader of the Free Democratic Party told the Bild am Sonntag newspaper on Sunday.

But Rösler said he could not be specific on the scale of the cuts until economic prognoses and tax income estimates for the coming year were available. “Only then can we be serious,” he said.

Rösler also denied rumours that he has a bad relationship with Finance Minister Wolfgang Schäuble from the government’s senior coalition partner the Christian Democratic Union. “Wolfgang Schäuble and I get on well. We have reconciled ourselves,” he said.

As if to demonstrate the strength of Germany’s ruling coalition, Rösler repeated the government’s line on eurobonds, a measure currently being proposed to help the European Union out of its debt crisis. “I rule out that there will be eurobonds with this government,” he said. “That would dramatically threaten our growth in Germany.”

He also said his party took some of the credit for reinforcing the government’s tough stance on eurobonds. “We have just prevented the introduction of eurobonds, which would have cost us dear,” he told the paper. “When it comes down to it, the people can count on the FDP.”

DAPD/bk

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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?

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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