The confederation of Danish industry, Dansk Industri (DI), recommends extending the researcher tax scheme, which entitles highly-skilled foreign employees who earn at least 63,700 kroner per month to a special tax deduction, from five to seven years.
According to DI, the extension would help Danish companies attract and retain more foreign talents, who would otherwise choose to work in countries with much lower income taxes. In Denmark, the talents pay income tax of 26 percent.
On average, highly-specialised employees stay in Denmark for 3.5 years, but then they start looking for work opportunities elsewhere.
“It’s a costly affair for companies each time they lose a highly-qualified employee. It leads to a loss of knowledge and a period of lower productivity while the company searches for a new employee and trains the new recruit,” said Kent Damsgaard, the deputy executive director at DI.
“Meanwhile, if an employee has more time to settle in Denmark, there’s a greater chance they will set down roots and want to stay.”
Despite the special tax deduction, employees who are entitled to the scheme pay the state an average of 225,000 kroner in tax per year, while highly educated immigrants under standard tax conditions contribute an average of 130,000 kroner, according to figures from a report by the think-tank DEA.
Moreover, the two-year extension would not present any costs to the state if the government raised the special tax rate by 1 percentage point from 26 to 27 percent.
“That one percentage point will not matter for recruitment,” said Lars-Peter Søbye, the CEO of the consulting group COWI.
“It’s the big increase that today comes after five years that’s a problem. And I think it’s great that this way the extension won’t cost the government anything, but instead purely benefit all parties.”
Necessary to attract skilled foreigners
Konservative and Radikale Venstre are in favour of the idea.
“If an extension of the researcher tax scheme from five to seven years will help, then we support it,” stated Martin Lidegaard, the spokesman for Radikale Venstre.
“It would, of course, be even better if our tax system made Denmark so attractive to employees that schemes like this weren’t necessary. But until that happens, it’s most certainly a good solution.”
The tax scheme for foreign researchers and highly-paid employees was first introduced in 1992, but has been amended several times since.