COPENHAGEN: Denmark's government yesterday presented a controversial growth package that would reduce corporate taxes and increase public spending to spur growth and create 150,000 jobs.
The ruling center-left coalition plan calls for a progressive reduction in corporate taxes from the current 25 percent to 22 percent, as well as an increase in public investment of six billion kroner (804 million euros or $ 1.05 billion) to stimulate the economy.
"We are creating jobs now, but we are also getting Denmark ready to grab the economic recovery when the internal slump turns," Social Democratic Prime Minister Helle Thorning-Schmidt told a news conference, adding that while there were no quick fixes, the growth plan was a "step in the right direction."
At the same time, Economy Minister Margrethe Vestager said no new taxes would be imposed on businesses.
"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 toward 2020," she said.
The tax cut mirrors neighboring Sweden's lowering of its corporate tax this year to 22 percent from 26.3 percent.
Denmark's corporate tax reduction would however not include a decrease in the tax on labor costs in the financial sector, nor would it apply to North Sea oil extraction.
The proposal also calls for lower energy duties for companies, an increase in planned public sector investment and a reintroduction of tax rebates for Danes who make home improvements.
The plan was met with criticism from Denmark's powerful unions, with eight of them having written an open letter to the prime minister complaining that reduced corporate tax would be at the expense of public investment.
Notably absent at yesterday's three-party news conference was the leader of the Socialist People's Party, Minister of Economic and Business Affairs Annette Vilhelmsen.
Rank and file party members have begun a petition to force the party out of the coalition immediately, or to call a membership ballot on the issue.
At the same time, the left wing Red Greens, normally seen as the government’s safety net in parliament, are calling for the public to act.
Johanne Schmidt Nielsen, the political spokeswoman of the party, which has a collective leadership structure, appealed on Tuesday for the public to demonstrate against the government plans.
But industry reacted positively to the government plan, and the country's chamber of commerce said it would help create jobs immediately.
Danish Confederation of Industries Chief Executive Karsten Dybvad also praised the government initiative.
"The tax burden on Danish companies has become so high that we lose orders and private sector jobs to our competitors in our neighboring countries. Now we have a chance to reverse the situation," he said in a statement.
Danish unemployment fell by 0.1 point to 6.2 percent in December, according to seasonally adjusted data from Statistics Denmark.
The move came one week after a proposal to overhaul the student grant system, and a social security reform that would force all unemployed under-30's to pursue an education rather than live off social security.
All three government proposals must now be negotiated with other parliamentary parties in order to win a majority.
Although the left-wing Red Greens are expected to vote against the government's proposals, center-right parties are expected to approve them.
Unlike its Scandinavian neighbors, Denmark has been dipping in and out of recession since the financial meltdown of 2008, as its banks buckled under a more than 20-percent fall in property prices and toxic loans to debt-laden farmers.
Denmark to cut corporate taxes under growth plan
