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September 10th, 2012

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Tax minister Thor Möger Pedersen (SF) has come under fire from several fronts recently after he revealed his plans to scupper the tax assessment law as part of the government’s hotly-debated tax reform plan.

The proposed law change will mean that Danes who work abroad for more than 183 days a year will be forced to pay Danish taxes from their earnings, an expense they have been exempt from until now.

Executives from 24 of Denmark’s top business, including A.P. Moller-Maersk and Carlsberg, jointly authored a letter to Pedersen urging him to reconsider his plans to drop the law, citing that it will hinder the country's ability to compete on a global scale.

“In addition to creating jobs and income for Denmark, the posting of Danes abroad garners international experience and knowledge, while conveying Danish expertise to our foreign activities,” the document to Pedersen said. “All of the above strengthens Danish workers and companies in the global competition.”

The two-page plea to Pedersen goes on to remind him that Denmark’s neighbours, Germany, Norway, Sweden and Finland, all have rules that make them exempt from taxation at home for working overseas over longer periods. The rule change could have dire effects on the Danish workers and companies alike.

“If Danes working abroad are to pay full Danish tax they face a considerable wage reduction, or alternatively their employers must pay a higher salary. If the expense of hiring a Dane increases by 30 to 50 percent, Danish companies will be forced to hire foreign workers at the expense of Danish counterparts,” they wrote in the document that was addressed to Pedersen and sent on September 3.

And it’s not only big business that will suffer from the law change. A number of aid organisations, such as Doctors Without Borders, are highly critical of the law change, arguing that it will affect Danish aid workers operating throughout the world.

But despite the criticism, Pedersen would not relent on his position that Danes stationed abroad should pay full tax like everyone else.

“It’s important to remember that this proposal is part of a tax reform that will greatly reduce taxes for the average Dane and will strengthen companies’ ability to compete,” Pedersen told Politiken newspaper. “And for me it’s more important that all Danes see tax alleviation rather than just a few.”

Pedersen said that he would follow the case closely, but the law change, which would affect about 6,000 Danes working abroad, remains on track.

“If the consequences of the law change turn out to be undesirable, then we have to address the proposal once again. But as of now, we believe that everyone who has a duty to pay taxes in Denmark must contribute to the welfare society.”

Parliament is scheduled to ratify the tax reform before September 15, and the new laws are set to go into effect in the new year.