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Denmark to tax Danish airline staff in Ireland

The tax minister says newly-signed treaty with Ireland is part of its fight against "social dumping" and an effort to rectify "unequal tax treatment for Danish companies".

Denmark to tax Danish airline staff in Ireland
Photo: Sean MacEntee/Flickr
Denmark said on Thursday it had signed a double taxation treaty with Ireland to ensure Danish citizens who work for Irish-registered airlines are taxed in their home country.
 
The previous agreement "resulted in unequal tax treatment for Danish companies," the Danish tax ministry said in a statement.
 
Irish budget airline Ryanair last year came under criticism when it emerged around 60 of its cabin crew could pay Irish tax rates even though they lived in Denmark, which boasts the world's highest taxes as a part of gross domestic product (GDP).
 
"The fight against social dumping is high on the government's agenda, and we… have been very aware that there were a number of problems in relation to taxation of airline crew," the tax minister, Morten Østergaard, said in a statement.
 
A Ryanair spokeswoman in Denmark said the company "already complies with all rules and will comply with any changes in rules," without elaborating.
 
Ryanair last month launched an appeal against a court ruling ordering it to pay nearly nine million euros ($12.2 million) in damages and interest for breaching French labour laws.
 
A French court ordered the damages in October and fined the company 200,000 euros after ruling that Ryanair illegally gave locally based staff Irish contracts to save money on payroll and other taxes.
 
Ireland too is facing scrutiny by Brussels over whether its carefully crafted laws allow companies to avoid paying higher taxes elsewhere, potentially amounting to illegal state aid.
 
Budget carrier Norwegian is planning to operate its cut-price flights between Europe and the US through a subsidiary based in Ireland, but has faced resistance from US airlines and unions who accuse it of trying to dodge laws and regulations.
 
The US Department of Transportation has delayed a decision on whether to grant the Irish subsidiary a foreign carrier permit.
 
A spokeswoman for Norwegian, Europe's third-largest budget airline, said the company was unable to comment Thursday on whether the Danish tax treaty would affect any of its staff.

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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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