Denmark to Raise Taxes, Slash Benefits in Post-COVID Recovery Plan

As explained by the Danish prime minister, the government seeks to push a new labour logic that implies one's duty to "contribute and be useful". On a down-to-Earth level, it intends to give benefits recipients a good run for their money.

Denmark has unveiled a reform plan aimed at remedying the aftermath of a budgetary spending spree at the height the COVID-19 pandemic.

Just last month, the Danish government pledged to tighten the financial screws, which it now intends to accomplish with its "Denmark can do more 1" plan. Higher taxes and lower benefits are among the key elements of the plan aspiring to alleviate the pressure on the state coffers, Danish Radio has reported.

Among other things, the government plans to increase the taxation share from 42 to 45 percent for gains over DKK 56,500 ($9,000).

Other crucial aspects include lower benefits rates for non-providing graduates below the age of 30 and introducing obligatory 37-hour-week "activation" for certain benefit receivers deemed work-ready.

"For too many years we have done many a disservice by not making demands on them", Social Democrat Prime Minister Mette Frederiksen said. "We want to push a new labour logic that conveys that you have a duty to contribute and be useful, and if you can't find work, then you must work for your benefits. If you don't show up in the morning, you don't get your benefits", she explained.

The government's goal, with the help of these initiatives, is to push an additional 10,500 people into the labour market by 2030. To assist this aim, a new benefits model will be launched: the newly unemployed will be awarded a high rate that will subsequently decrease over time, prompting the recipients to find work.

Prime Minister Frederiksen ventured that despite unplanned expenditures during the COVID-19 crisis, which in addition to benefits included a controversial decision to cull the full stock of Danish farmed mink, effectively wiping out an entire world-class fur industry, the Danish economy was performing "exceptionally well", yet noticed that there was still room for improvement.

Among other planned expenditures, the Danish government wants to invest DKK 4.5 billion ($750 million) each year in the so-called Green Switch, which is meant to phase out fossil fuels from everyday life, from means of transportation to industry and private homes. This coupled with DKK 1 billion ($160 million) in research and development and a further DKK 1 billion ($160 million) in resources aims to reach the 2030 climate goal.

Yet, despite the widely accepted goals, obtaining the necessary parliamentary support may prove a tough task because the Socialist People's Party and the Red-Green Alliance, the ruling Social Democrats' premiere sidekicks, have already voiced their displeasure with certain points in the proposal.

According to the Tax Foundation, with a total of DKK 285 billion ($45 billion), almost 13 percent of the Danish GDP, earmarked for a plethora of relief packages to support businesses and citizens hit by the pandemic, Denmark's COVID-19 plan was one of the most expensive in the world.

So far, Denmark, a nation of 5.8 million, has seen nearly 350,000 COVID-19 cases, with nearly 2,600 deaths.