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April 22nd, 2013

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A bill of initiatives designed to boost growth and employment was agreed upon yesterday between the government and opposition. The various elements of the bill will cost 17 billion kroner through 2020, but it is far from certain what effect the bill will have on the Danish economy.

Among the initiatives is a reduced levy on beer and soft drinks to encourage consumers to buy those products in Denmark rather than over the border in Germany where they are cheaper, as well as a 15,000 kroner annual tax deduction that can be claimed to cover the costs of improvements to both homes and summer residences.

The plan also included a reduced energy tariff for businesses, investment in adult further education, and an abolition of a levy on packaging.

Yesterday’s agreement completed only the first half of negotiations over the government’s proposed growth bill. The second half, which is being discussed today, includes a proposal to reduce the corporate tax rate from 25 to 22 percent. The negotiations were broken into two phases to accommodate opposition party Dansk Folkeparti, which supported the first half of the deal but announced that it could not agree to the corporate tax cuts, especially given that the cost of the proposal would be paid through cuts to welfare.

In a press release, the government said they were pleased that a deal on the first half had been struck and that Danish businesses would benefit from the initiatives.

“The deal will reduce a number of levies on businesses,” the economy minister, Margrethe Vestager (Radikale), stated. “Together with the government’s other initiatives, it will promote growth and employment. That is our key priority.”

Finance Minister Bjarne Corydon (Socialdemokraterne) added that the second half of the deal would see even more investments in improving the conditions for running a business in Denmark.

“Our businesses will be given the power to pull through the crisis so that when it ends there will be more jobs for Danes,” Corydon stated.

Industry lobby group Dansk Industri reacted positively to the deal and the reduction in levies that are hoped to reduce costs for Danish industry and manufacturers.

“The deal is good news for many Danish businesses, including industries that are very dependent on energy to produce their goods,” DI's director, Tine Roed, wrote in a press release. “It provides them with an important improvement to their ability to compete compared to businesses in our neighbouring countries.”

Harboe Brewery welcomed the reduced taxes on beer and soft drinks.

“Salaries in Denmark are so high that our operations are clearly improved with the reduction of the tax on beer and the abolition of the tax on soda,” Harboe's administrative director, Bernd Griese, told Jyllands-Posten. “It will increase the amount of both beer and soda that will be sold.”

Far-left party Enhedslisten (EL), the only party not to agree to the deal, argues that the government is reneging on promises to support a transition to green energy.

“While the government talks about being green, the policies it actually pursues are black,” EL's environment spokesperson, Per Clausen, told Politiken newspaper. “The government is trying to send a green signal but the general economic politics in Denmark are heading in the complete opposite direction.”

Clausen particularly criticised the decision to reduce the levy on energy for industry and the abolishment of a packaging levy.

“The consequence of the plan will be more pollution, a greater use of resources and increased release of CO2,” Clausen said. “Lowering levies on packaging stands in direct opposition to the government’s wish to reduce the problem of waste.”

The initiatives will also have a questionable impact on job creation, according to Sten Bocian, Danske Bank's chief economist.

“In the short term, the growth bill will stimulate economic growth and employment, but it won’t have a dramatic effect on creating jobs,” Bocian told Ritzau.“In a macro-economic perspective, it’s not an enormous reform, but it does gives a little push to an economy that has otherwise been frozen over the past two or three years.”

But construction lobby group group Dansk Byggeri argued that reimplementing the tax deduction for home improvements, which had expired at the end of 2012, to cover all of 2013 and 2014 would create several thousand jobs.

“Last year the deduction created around 5,000 jobs and we expect it will create around 4,100 full time positions in 2013, 3,200 of which will be in construction,” Dansk Byggeri's CEO, Lars Storr-Hansen, wrote in a press release.

Factfile | Growth bill – Part 1

A tax on soft drinks will be halved from July and abolished in 2014

A tax on beer will be reduced by 15 percent from July

15,000 kroner tax deduction for home improvements reintroduced for 2013 and 2014

Cars will have to be 75 percent damaged instead of 65 percent before they are considered ‘written-off’

Reduced energy levies for industry

Abolition of weight-based waste levy

More and better further education for adults

200 million kroner set aside for tearing down buildings that are in poor condition or are unused

Broadband on the island of Bornholm will be improved