General Election in Denmark - Risks and Opportunities for Companies 

On March 24, 2024, a general election for the Danish Parliament was held. The election resulted in a very unclear parliamentary situation, with neither the red nor the blue bloc achieving a majority. As many as twelve parties (plus four parties from Greenland and the Faroe Islands with one mandate each) were elected. Never before have so many parties been represented in the Danish Parliament. 

The election was a defeat for the sitting government. Prime Minister Mette Frederiksen’s party, the Social Democrats, became the largest party with just under 22 percent of the votes. This is their worst election result in more than 100 years. Venstre (The Liberal Party), which was also part of the former government, received 10 percent of the votes – their worst result ever since 1870. 

Former Prime Minister and Foreign Minister Lars Løkke Rasmussen currently holds the decisive mandates, but it is uncertain what the next government will look like and, therefore, what program the government will implement. The following provides an overview of the labor market-related proposals debated during the election campaign that may become a reality depending on the formation of the government. 

Wealth Tax 

The Social Democrats have proposed introducing a wealth tax of 0.5 percent on all wealth over DKK 25 million. The value of both real estate and financial assets would be included in the tax base. However, DKK 10 million per person would be exempt if it relates to the value of a primary residence. 

A wealth tax is expected to pull money out of companies – money that could otherwise be used for growth. This could be a significant obstacle, especially for entrepreneurs. During the election campaign, the Social Democrats tried to convey that entrepreneurs would be exempt, but as the proposal is currently formulated, this is not the case. Several business leaders and company owners have stated that they will leave Denmark if the tax is introduced. If that happens, the proceeds from the tax will be lower than expected. The chairman of the trade union Dansk Metal has also warned against the tax. 

International Employees 

The Social Democrats want to make several of the business schemes that allow non-EU citizens to work in Denmark country-specific. This means that only people from selected non-EU countries would be able to come to Denmark to work. Furthermore, the party wants to require companies to have a collective agreement in order to recruit employees from outside the EU. The party also wants companies recruiting international employees to take responsibility for them learning Danish. 

Limiting recruitment to specific countries will likely make it harder for employers to find the necessary labor. A consequence of the requirement for a collective agreement would be the exclusion of all companies without traditional collective agreements, making it impossible for them to recruit from outside the EU. The requirement for Danish language training also risks reducing the labor supply and increasing costs for companies. 

In contrast, the Social Liberal Party (Radikale Venstre) wants to improve the opportunities for international recruitment. They propose a scheme without country restrictions that allows companies to recruit from all countries as long as the job is covered by a collective agreement. 

Right to Part-Time Work 

The Social Democrats have proposed that families with children should have the right to reduce their working hours and receive state support as compensation for the lost hours. The proposal leaves many uncertainties, including whether the right to a public benefit also gives the employee a right against the employer to go part-time and later return to full-time. If the proposal involves rights affecting companies, it could lead to hesitation in hiring employees expected to make use of this right. 

Earlier Withdrawal 

Pension and early retirement have been heavily debated. The Social Democrats want to change the link between retirement age and average life expectancy so that from 2045, the retirement age rises more slowly. They also want to improve the possibilities for early retirement for people with many years in the labor market. 

Venstre has proposed improving the possibilities for early withdrawal for people who can no longer perform their jobs by extending the possibility from six to nine years before the state pension age. Radikale Venstre also proposes a slower increase in the retirement age from 2045 but wants to abolish the early retirement and senior pension schemes at the same time. 

Lower Corporate Tax 

Venstre wants to reduce corporate tax from 22 to 20 percent and allocate an additional DKK 1 billion to lower taxes for small and medium-sized enterprises. Liberal Alliance wants to reduce corporate tax to 18 percent. These proposals would improve the conditions for doing business in Denmark and strengthen the basis for development. 

Reduction of Administrative Burdens 

Several parties propose reducing the administrative burdens for companies by 25 percent by 2030. Fewer administrative burdens are equivalent to a tax cut, as companies would need to spend fewer resources on activities that do not create value. 

Making it More Attractive to Invest in Shares 

Venstre and Liberal Alliance have proposed reducing the tax on share returns to make it more attractive to inject capital into the business community. Lower taxation would increase companies' access to venture capital. 

Conclusion 

The most crucial thing for the business community is not what was discussed during the election campaign, but the concrete plans a future government will have. More than a month has passed since the general election, and it is still unclear how a future government will be formed and what specific program it will pursue.

Disclaimer: This article is not and cannot replace legal advice.