The Danish financial sector is hit the hardest

“You don’t have punitive actions against the financial sector the same way elsewhere in the world. Except in Spain, where it has also been decided to punish the sector financially – but for a limited period of one year”.

Senior Advisor at Aalborg University Lars Krull, who is also a former member of Finans Danmark’s money laundering task force, explains:

“The shaming and punishment of the financial sector on top of the financial crisis at home with the financing of the so-called Arne pension is in a class by itself when you look around Europe”.

The financial sector pays the majority of the Arne pension, which gives people with many years of connection to the labour market the option of an earlier pension. This happens via higher corporate ownership of financial companies more than other companies.

False message

“The politicians’ message is that they will make the banks pay that way. This decision is justified by the desire for revenge against the banks’ behaviour. I don’t care about either the shaming or the indirect tax, which is what it is”, says Lars Krull.

“It’s not true that the banks will pay in the end. We are all going to pay for the Arne pension, as customers of banks and mortgage institutions. So it is indirect taxation”.

He says that he has discussed the matter with many politicians.

“They say that I’m right, but that it’s difficult to explain to the population how this is connected. That the banks need to pay, on the other hand, is easy to relate to. I think it’s a problem when ministers don’t tell the truth about this”.

Never seen before

It has happened before that an industry has been subject to reprisals. For example, there have been interventions against real estate agents and education requirements have been set. But it has never been seen before that a sector has been hit with a supplement to corporate tax”, says Lars Krull:

“The banks can easily pay, because it only affects the ones who make money. But this creates fiscal asymmetry and is a problem of reprisals against one sector”.

The financial sector also finds itself burdened by the so-called payroll tax, which is imposed on companies that sell VAT-free services. Financial companies are up to having to pay 15.3 per cent of total wage costs, and this costs jobs. Years ago, Copenhagen Economics estimated that the tax would cost up to 10,000 jobs in Denmark.

However, Lars Krull does not believe that the payroll tax has much of an impact on companies’ decision to place labour elsewhere than in Denmark:

“In other countries, they pay social security tax on the salary, we don’t do that in Denmark. I don’t buy the arguments that the payroll expenses are keeping people away. There is so much else in Denmark that does that, not just that. In Swedish, social security taxes amounted to 33 per cent, so in that context the payroll expenses here at home are not that significant”.