High Tax Revenues Reduce Deficit in Denmark

May 2, 2012 Taxation in Denmark

Margrethe Vestager Announced Deficit ImprovementCOPENHAGEN – The Danish government has announced that its budget deficit will not be as severe as projected earlier, primarily due to higher than expected tax collections and due to new efforts to tighten tax compliance amongst Danish businesses.

On April 30th the Danish media announced that the Minister of the Economy Margrethe Vestager revealed that the level of the government’s budget deficit for the 2012 year would be DKK 26 billion less than was previously forecasted at DKK 100.7 billion, adding that “…it’s no cause for celebration, but it does seem to be getting better.”

She also said that the government of Denmark expects to slash its budget deficit further to a level of DKK 35 billion by the end of 2013, reducing the deficit to 1.9 percent of the GDP, which will allow the Denmark to meet the EU requirement to not exceed a deficit level of 3 percent.

Explaining the factors behind the rise in revenues, the Minister said that the better than expected results are due to growth in the collections of taxes on returns from pension funds and an increase in revenues from oil extraction activities in the North Sea.

Politicians and economic experts in Denmark are already calling for the government to use the newly found breathing room to initiate further economic stimulus measures. However, one of the leaders of the opposition party Liberal Alliance Simon Ammitzbøll noted that despite the drop, the country’s deficit is still large, and Denmark needs to carryout significant reforms of the tax system in order to truly address its economic problems.

In an effort to further boost revenues, the government of Denmark has also announced that it would provide more funding to national tax authorities (SKAT), to fund additional staff and initiate new projects to improve tax compliance in the Danish society.

Photo by Radikale Venstre