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May 30th, 2012

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"Denmark at work” is the title of the coalition government’s proposal for tax reform that is now being debated by parliament.

At the core of the proposals is reducing taxes on work, raising taxation on property, and slowing the rate of increase of social welfare benefits to follow inflation.

With negotiations now underway, the government’s task is to secure as broad a political backing as possible for the reform, without having to make such large changes that their position in power is undermined.

Their primary target in the opposition is Venstre – parliament’s biggest party – who partially approved of the increase to the threshold of the top tax bracket, topskat, but criticised the increase in property taxes.

”The government is taking money out of one pocket and putting it back in the other,” Venstre declared on its website. “That is the essence of the tax reform that the government laid out yesterday.”

Venstre argued that the government could have eliminated the top tax bracket entirely and reduced the tax burden on 725,000 Danes.

“If Venstre is to support the tax reform, we need it to be more ambitious," the party's online statement read. "The government has already pointed out that 13 billion kroner could be gained through reforms. Venstre does not want to participate in an unambitious reform that simply moves money from one pocket to the other.”

Fellow opposition party Konservative had a similar message to Venstre.

“With the coming negotiations, it is vital that tax comes down,” Konservative states on its website. “Tax reform should lead to lower taxes on all Danes, not just a redistribution in which the government takes from those who own their own home, from those who have saved for their retirements, and from those who buy goods in Denmark.”

Libertarian party Liberal Alliance had not released a statement responding to the government’s tax reforms on Wednesday, though their commonly-voiced opinion is their desire to remove topskat altogether, reduce the basic income tax rate and halve corporation tax.

Despite their relatively extreme views on taxation, the party seems willing to take part in negotiations after its leader, Anders Samuelsen, announced on Facebook that he had asked the Konservativer whether they would like to join forces.

Most political commentators, however, agreed that the government’s tax proposal was designed to attract the support of Venstre – a move that Frank Aaen, spokesperson for far-left government support party Enhedslisten, found surprising.

“It would be strange if the government wants to negotiate with the right-wing that wants to overthrow them,” Aaen wrote on Enhedlisten’s website.

Technically the government need only capture Enhedslisten's support in order to pass their tax reform.

But the proposal’s focus on putting more money in the pocket of middle-class workers, while reducing the rate of increase of social welfare benefits, is a bitter pill for the party to swallow.

“The reform means that the unemployed, welfare recipients and early retirees will end up paying, while bank directors and others with much higher incomes will end up earning more,” Aaen wrote, adding that he could not understand why the poorest would have to pay for the tax reductions of the wealthiest.

“If they want Enhedslisten's support, then they need to sort out the social [imbalance]. Otherwise the government will have to make a deal with Venstre which will make [the reform] even worse than it already is.”