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Danish business organisation calls for tax breaks on leisure

A major interest organisation for Danish businesses has proposed tax deductions for visiting tourist attractions, temporary reduction of the value-added tax (moms) rate, and millions of kroner in state support to help get the tourism and experience industries in Denmark going after a long shutdown.

Danish business organisation calls for tax breaks on leisure
The Big Bio cinema in Copenhagen. Photo:Asger Ladefoged/Ritzau Scanpix

The Confederation of Danish Industry (DI) presented on Wednesday twelve proposals to help the hard-pressed sectors.

“Something needs to be done now. Many of our neighbouring countries have already gone on the offensive to ensure that their hotels, restaurants, and attractions emerge from the crisis strongly,” DI’s deputy director Henriette Søltoft said.

“We will also have to do this if we are not to be outcompeted by attractions abroad,” she added.

DI has therefore proposed a stimulus package that will increase activity in the sector, lower costs for businesses, and support development and restructuring in the wake of the coronavirus crisis.

Among the proposals is to introduce a tax deduction in the style of the existing deduction applicable to home improvements (håndværkerfradraget) on services valued over 250 kroner.

Årsopgørelse: Why taxpayers in Denmark are checking whether they are due money back

The deduction would apply for two years and allow taxpayers to deduct value-added tax (moms) from their tax return when, for example, they visit a restaurant or the cinema.

“Our hope is that this will seriously get Danes using all the fantastic leisure options that we have here at home,” said Søltoft.

DI is also calling for a lower value-added tax rate of 12.5 percent for hotels, the restaurant industry, and amusements, valid for one year.

The organisation argues this will improve the price level and be in line with similar initiatives in Norway, Germany, and the United Kingdom.

DI has not estimated the cost of the plan for the Danish treasury. But the organisation writes in the proposal that it is necessary to consider unconventional methods in an extraordinary situation, even if it will be costly.

Other proposals from DI are to set aside 200 million kroner for restructuring of the cultural industries and 200 million kroner for innovation in the tourism and leisure industries.

Denmark’s tourism industry saw a 31 billion kroner drop in its turnover in 2020, according to DI.

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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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