The new tax agreement in Denmark that maintains the financial sector's corporate tax rate, despite a cut in the general corporate tax rate, sends “mixed signals” to the insurance and pensions industry, Insurance & Pension (I&P) Denmark has stated.

Under the agreement, the financial sector's corporate tax rate will remain at 26 per cent, while the general corporate tax rate will be reduced from 22 per cent to 19 per cent.

I&P Denmark noted that the country was the only one with a special tax on the insurance and pensions industry.

It added that while the agreement aims to reduce the administrative burden and spare pension savers from tax cuts that affect the wider business community, the corporate tax gap increase to 7 percentage points would mean the industry does not benefit from the reduction in the wider corporate tax rate.

“It is in itself deeply problematic that financial companies have to pay more in tax than the rest of the Danish business community,” said I&P Denmark CEO, Kent Damsgaard.

“This gap is now increasing with this agreement, while at the same time there is a demand from political parties that we as an industry play an even greater role in investing in future growth and development and take part in prevention and preparedness.

“It would be an immeasurably better measure to promote growth, investment and financial security if the special tax were dropped.”

Despite these concerns, Damsgaard welcomed the exemption of life insurance companies’ long-term investments from the new 15-year limit on loss carryforwards, noting that the alternative would have affected Danish pension savers.

He also highlighted the positive industry reaction for the separate focus on removing administrative burdens in the financial sector.

“It is important for Denmark's competitiveness to reduce burdens that hinder investment, security and growth,” Damsgaard said.

“We are therefore pleased that the government and the Danish People's Party have agreed to simplify the industry's conditions in order to deliver good returns on Danes' pension savings and support the insurance community that is crucial to keeping the wheels turning throughout Denmark.”

---