November 13, 2017 / 2:37 PM / 2 years ago

Denmark revamps tax system to boost investment

COPENHAGEN (Reuters) - Denmark’s government has reached agreement with other parties to simplify one of the world’s most complex tax systems - including phasing out a 100-year old tax on nuts.

The town hall is pictured in Copenhagen, Denmark April 19, 2017. REUTERS/Fabian Bimmer

The country’s right-leaning government wants to cut taxes and trim bureaucracy to encourage Danes to work more and spend some of their large savings to support businesses, while also discouraging them from buying groceries in neighboring Germany.

Danes hand over close to half of their salary to the state each month, and must also navigate complex systems of duties, tolls and excise taxes.

The tax on nuts was introduced in 1922 as part of new levies on luxury goods such as chocolate to discourage people from making homemade marzipan.

Removing the tax, which was last increased in 2009, will cost the government around 175 million Danish crowns ($27 million) each year.

The growth package agreed between the government, its populist ally Danish People’s Party and the opposition party the Social-Liberals included reducing tax on equity investments to encourage more companies to list in Copenhagen, copying a Swedish and Norwegian model known as investment savings account.

The investment savings account is less lucrative than the government’s initial proposal from August, and a government proposal to lower the overall share income tax has been dropped altogether, as Danish People’s Party has curbed the package to focus more on limiting cross-border shopping near Germany.

Once fully phased in by 2022, each Dane will be able to deposit up to 200,000 crowns ($31,000) in a stock investment account taxed at 17 percent of the yield annually.

Under current rules share income up to 51,700 crowns is taxed at 27 percent, while share income in excess of this amount is taxed at 42 percent.

Last year only five companies listed in Denmark, compared to 152 in Sweden and 79 in Norway.

The package also includes a new tax allowance for direct investments in non-listed companies and improved tax conditions for investments in foreign Exchange Traded Funds (ETFs)

With interest rates on bank deposits around zero, the government wants to utilize some of the 850 billion Danish crowns ($133 billion) that are effectively sitting idle in bank accounts in the country.

The growth package, which was agreed on late on Sunday and presented in detail on Monday, will also focus on digitization, green transition, tourism and competition, and will cost 14.7 billion crowns in the years through to 2025.

($1 = 6.3870 Danish crowns)

Editing by Jacob Gronholt-Pedersen and Toby Chopra

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