Simplicity, Mr Corydon, thank you – The Post

Simplicity, Mr Corydon, thank you

October 10th, 2014 6:55 pm| by admin
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Denmark has to make some significant fiscal changes in order to avoid breaching the EU deficit limit of 3 percent of GDP. 

Mr Bjarne Corydon, the minister of finance, has launched a proposal to reduce the income tax rate and give a pension tax rebate in order to help cut Denmark’s deficit. 

Starting from 1 April, 2015, a tax rebate of 2.5 percent will be available to eligible pension fund members over the age of 60. Additionally, Corydon announced the reduction of the income tax rate from 40 to 37.5 percent next year.  
So far, so good: the government estimates that this new plan will improve the budget balance by 0.75 percent.

However, the stock market’s recovery since the 2008 financial crisis should have inspired people to invest in shares – preferably Danish shares. Expats in particular might have been tempted to invest, especially in the companies where they are employed, like ISS, Novo, Carlsberg and Lundbeck.

Unfortunately, ex-pats have stepped back from doing so because they as well as Danes are suffering from the most diabolically complex tax regime. Corydon’s new tax plan liberates pension savings by about 2.5 percent. Yet, there still remains the question of reinvestment.  What are eligible pensioners to do with the money they receive from the tax rebate? Savings accounts in banks have a 0 percent interest rate at best. Bonds are not much better and are frequently recalled.

It has proven highly challenging to explain the tax rules of share capital gain to the Danes and likewise to expats.  This means that investments are not made – and if they are made, the complex fiscal rules inhibit incentives to trade.

The solution is not around the corner – it is right in front of you. The rules applicable to pension savings (rate pensioners) with tax deductions could be imposed on free capital. The banks have the account system ready and operational: you just establish a share savings account. Within the account you can trade, buy and sell shares with no effect for immediate taxation, but as you get no deduction when saving you are obliged to pay share capital gain tax on the average profit or get a credit for loss for later profit harvesting. Hereby you avoid having to learn the totally complicated share profit tax rules. You could operate in the market without paying attention to these rules, but eventually you pay tax on your profit. It could even be taxed preliminarily year by year – but it will stop killing the incentive to invest in Danish companies!!

So please Mr Corydon – talk to the new tax minister and make him come up with a simple solution to a poisonous regime for the share investment culture for Danes and expats alike. 

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