Denmark to Cut Corporate Tax to 22% to Improve Competitiveness

Denmark’s government plans to lower the corporate tax rate to 22% from 25% in a bid to improve competitiveness and pull the Nordic country out of a recession.

The tax cut is part of a package of measures to boost growth and employment presented in Copenhagen on 26 February by Danish prime minister, Helle Thorning-Schmidt. Denmark’s economy is still struggling to recover from a property bubble that burst in 2008 that triggered a local banking crisis and wiped out more than a dozen lenders. Denmark’s gross domestic product (GDP) contracted by 0.4% in 2012 according to preliminary estimates.

Thorning-Schmidt’s centre-left coalition government will also increase public spending by krone (DKK) 6bn, equivalent to €804m or US$1.05bn, to further stimulate the economy and create 150,000 jobs.  Denmark’s government plans to lower the corporate tax rate to 22% from 25% in a bid to improve competitiveness and pull the Nordic country out of a recession.

“We are creating jobs now, but we are also getting Denmark ready to grab the economic recovery when the internal slump turns,” Thorning-Schmidt said at a news conference, adding that there were no quick fixes but the growth plan was a “step in the right direction.”

The economy minister, Margrethe Vestager, added: “We are sending a clear signal to companies that we do not plan any new taxes and duties for businesses. This is not just a growth package; it is a complete growth plan towards 2020.” The corporate tax reduction will not, however, extend to a decrease in the tax on labour costs in the financial sector or to North Sea oil extraction.

Although the package was welcomed by Danish industry, eight unions have written an open letter to the prime minister complaining that reduced corporate tax will be at the expense of public investment.

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