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How will Denmark’s new transport proposal affect the cost of cars?

A new system for applying registration fees to electric and fossil fuel-powered cars is part of a climate and transport proposal launched by the Danish government this week.

Published: 25 September 2020 16:52 CEST
How will Denmark’s new transport proposal affect the cost of cars?
Photo: Emil Helms/Ritzau Scanpix

On Thursday, the government began negotiations over a planned reform to transport taxes which it has said will correct the ‘uneven’ current system.

The proposal includes measures aimed at increasing incentives to buy and use electric cars, in line with the government’s stated target of increasing the number of such cars from 45,000 to 500,000 on Danish roads by 2030.

To that end, the proposal seeks to make popular models of electric cars equivalent in price to their fossil fuel-driven counterparts and to end large subsidies on luxury electric vehicles.

Under current rules, newly-purchased electric cars are only liable for 20 percent of overall registration fees and are also encompassed by exemptions for 40,000 kroner of their value.

This means that, in practice, electric cars worth up to 400,000 kroner are free of registration fees.

READ ALSO: Explained: Why is it so expensive to buy a car in Denmark?

But the current rules also mean that larger electric cars achieve the biggest registrations fee subsidies. That would change under the new proposal.

The new system for applying registration fees to electric cars is part of a broader climate transport proposal. It also includes provisions to change the way registration fees are applied to traditional petrol and diesel cars.

Taxes on these types of car were reduced in 2017 under the previous government, but they are now set to become more expensive to run again through increased fuel costs as well as changes to the existing car tax system.

“The registration tax on purchase price for the cars we most commonly own will make the new-purchase price increase by around one percent. For more expensive cars, the new-purchase price will increase by around 1-4 percent,” tax minister Morten Bødskov told DR.

Changes in fuel prices will make it more only slightly more costly for petrol and diesel car owners to refuel, compared to electric car drivers.

“For normal family cars with normal daily fuel use for petrol cost the owner in the region of 60 kroner (extra) per year,” Bødskov said.

“For diesel cars it is a bit more expensive, but there we are talking about 300 kroner per year,” he added.

The minority government will now negotiate with parliamentary partners in order to achieve a majority for the overall proposal.

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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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