By Anne-Kirstin Berger, photos by Rasmus Ursin Knudsen, Lærdansk and Steen Brogaard
Even in one of the “happiest countries in the world” the living conditions are not ideal. Denmark’s first and second ranks (2016 and 2017 respectively) in the United Nations’ “World Happiness Report” are mostly due to two factors: its high GDP per capita and its elaborate social support system. To maintain this living standard, Denmark needs to adapt its legislation to economic and demographic developments. The agreement to lower taxes (“Aftale om lavere skat på arbejdsindkomst og større fradrag for pensionsindbetalinger“) that the government published in the beginning of February is meant to be such an adaption. However, while experts question the economic benefit of the law project, they agree that the impacts for foreigners living in Denmark and for Danes abroad are severe.
Denmark’s welfare system depends on a fragile balance between contributions and payments, which is threatened by demographic trends: The number of social assistance recipients has continously risen during the past 10 years, as the Organization of Economic Cooperation and Development (OECD) has documented. To solve the problem, the new tax law will increase allowances on pension savings, so that peolpe are encouraged to build reserves for their own retirement. Apart from that, the new rules tackle another problem, described by the OECD: ”In Denmark, taking up a low paid job entails an after-tax income loss or only a minor gain.” To end this misbalance, the agreement will lower the taxation of work-income on both the low and the high end of the income scale. Although this measure is in line with the OECD’s recommendations of encouraging more peolpe to work, Bo Sandemann Rasmussen, Professor at the Department of Business and Economics at Aarhus University, estimates that the “overall economic impact of the new law is next to nothing. It’s below 2000 people they expect will increase their labour supply with these measures. We have 3 million people [working] now in Denmark, so below 2000 out of 3 million, that’s hardly anything. Given the uncertainties surrounding how you calculate the effects it could as well be a zero effect overall.”
By contrast, the effect that the new law will have for foreigners in Denmark and Danish citizens abroad are not neglectable. The Insurance Manager at Akademikers A-kasse, Jes Flatau, calls the law project “one of the most stupid proposals I’ve experienced in my good 30 years in the industry. I assume that it is about cutting off foreigners from unemployment benefits, but it affects anyone who has been abroad for a [longer] period.”
What outrages Flatau is not the reduction of taxes, but one of the measures that will be taken to compensate the decreasing public revenues: Tightening the rules to access various welfare benefits: dagpenge, uddannelseshjælp and kontanthjælp, ressourceforløbsydelse, fleksløntilskud and ledigheds-ydelse. For example, the propsal provides that people from outside the EU/EEA who work in Denmark and contribute to an “A-kasse” (a voluntary unemployment insurance fund) will not be able to receive unemployment benefits (dagpenge) during the first seven years of their stay.
So far, members of an A-kasse were eligible for unemployment benefits after one year of membership if they earned a minimum salary of 230,000 DKK during the past year – regardless if the job was carried out in Denmark or abroad. The new tax law introduces a residence requirement that will gradually enter into force: From the 1st of January 2019 on, benefits will only be payed to contributors who have been in Denmark or another EU/EEA country during the last five years. The requirement will rise to 6 years in 2020 and remain at 7 years from 2021 onward. This rule “breaks down with basic unemployment insurance principles”, in the opinion of Jes Flatau, and it affects foreigners in Denmark and Danes abroad alike.
It is for this reason that the head of the organisation “Danes Worldwide”, Anne Marie Dalgaard, is now answering many calls by Danish people abroad who are worried not to get any return for their payments. “Just this morning I received a message by a Dane living outside the EU who has been paying to A-kasse for 25 years. With the new rules, he would not get benefits, because he has been abroad for many years. He doesn’t expect to be unemployed, but it could happen when he comes back”.
Job search can take up to one year – a period in which homecomers will not be able to enjoy the expected financial security. Dalgaard considers this “very unfair to Danes which have been encouraged to go abroad by whatever government has been in power in the last many, many years. These Danes have done exactly what the government has encouraged them to do: to go abroad, gain international experience, understand foreign cultures, get a professional network and at a given point come back to [their] country. And if they now unexpectedly get unemployed, they will not get any unemployment benefit.”
In her office in Aarhus, Marianne Jensen has made herself comfortable for the second interview within an hour: The head of the language school Lærdansk in Aarhus is asked to explain the implications of a new rule that are not yet fully clear to herself: the payment of 2,000 DKK per module for the Danish language classes which have, so far, been for free for every foreigner with a CPR-number. This offer has, until now, differentiated Denmark from most of its European neighbours, such as Germany or Sweden, where foreigners need to pay for language training. Apart from balancing a minor portion of the missing tax income, the legislators hope that the new fee will create an “incentive [so that] only the self-sustained students who are motivated commence the education”, as the law proposal states. Marianne Jensen is not sure about the motivating effect of the fee. She fears that the payment instead creates an additional barrier for foreigners to integrate, find work in Denmark and ultimately acquire the permanent residence permit, which requires a proof of Danish language skills.
“2,000 DKK per module is quite a lot, especially for students, and also for some employees who don’t earn that much money”, she notes. A survey conducted by the language school has indeed revealed that the number of students will probably drop by half. The consequences for the Lærdansk are immense: “I was very shocked when I read that [the payment] would be implemented by the 1st of July. Because imagine, all language schools in Denmark will have to reduce their staff. A lot of employees have six months of dismissal protection, so we have to react very, very fast now. This is sad, because the staff who works here, they are qualified, they are very engaged in their work and splendid teachers. And when they are dismissed here they can’t simply go to other language schools.”
Jensen hopes for a reduction of the proposed fee and counts on universities and Danish companies to exercise influence on the law-makers before the proposal turns into a binding law in April. With this hope, she is not alone. “Danes Worldwide” has also announced to advocate for the rights of the citizens it represents. In the meantime, the political support for the agreement is strong, with the right wing Dansk Folkeparti backing the proposal. It comes in a phase of heated public debate about immigration in Denmark: 51 per cent of the Danes consider the impact of immigration rather negative, while 31 per cent say that positive factors prevail (Statista 2017).
Against this background, the law proposal can be seen as a political concession to those voters who are sceptical towards immigration. Jutland Station asked members of all parties that are represented in the Danish Parliament (Folketing) for a statement on the law, but only got a return by Morten Østergaard (Radikale Venstre). He calls the law project “pure politics that sadly again aims to make life harder for Danes abroad or expats in Denmark.” The fiscal impact of this tax law, he says, is “next to none.”