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I.2. COUNTRY NOTES
ECONOMIC POLICY REFORMS: GOING FOR GROWTH – ISBN 92-64-03047-6 – © OECD 2007
12
DENMARK

The level of GDP per capita is declining relative to the best
performing countries, partly due to slower productivity
improvements. Although employment rates are generally high, average
working hours are relatively short, and
labour utilisation is weak for some groups.

Priorities supported by indicators

Reduce marginal taxes on labour income
Marginal taxes are high and the top bracket is applied from relatively
low income levels. With
social security contributions and income taxes combining to a marginal
rate of above 60%, there is
little incentive to work longer hours.
Actions taken: The tax freeze has ended the upward drift in municipal
income tax rates, but the
number of people in the top income tax bracket still grows.
Recommendations: When the cyclical position allows, lift the income
threshold from where the top
tax rate is applied. Raising the real estate tax rate would create
further room for cutting taxes on
income from work and also help reduce indirect housing subsidies
arising from the nominal freeze of
real estate taxes.

Improve efficiency of the education system
The proficiency of 15-year olds in reading and science is relatively
low while spending is among
the highest in the OECD. Taxes and grants encourage university students
to start and end studies late.
Actions taken: The introduction of national tests in reading,
mathematics, science and English will
monitor progress in schools, and teacher training will be strengthened
in key subjects. Students
applying for university places at most two years after ending their
secondary education will be given
priority. University funding and study programmes will be adjusted to
encourage early completion.
Recommendations: Increase the educational content of the introductory
year for six-year olds to
increase learning capacity and abolish the voluntary 10th form. Develop
a system of tuition charging
and loans for tertiary education to encourage completion, while
reducing some high marginal income
tax rates.

Reform disability benefit schemes
Although it has started to decline, the share of disability pensioners
in the adult population is
above the OECD average. Schemes giving wage subsidies and support to
keep in employment disabled
people with significant remaining work capacity suffer from overuse.
Actions taken: The maximum wage subsidy under the Flexjob scheme was
reduced from July2006, but it
is still well above the disability pension. Flexjob eligibility
assessment has also been tightened. Measures
to better accommodate people with mental health problems in the
workplace are being introduced.
Recommendations: Reduce the maximum Flexjob subsidy further and limit
it to the actual hours
worked, while paying an unemployment benefit for the hours not worked.
Review disability pensions
and Flexjob cases on a regular basis with a view to bringing more
beneficiaries back to unsubsidised
employment. Develop prevention and rehabilitation further to facilitate
an additional reduction of the
number of disability recipients.

Other key priorities
●Notwithstanding relatively competition-friendly regulations in the
business sector, restrictions in
some sectors persist and should be eased. Open publicly-funded services
to competition, continue
privatisation, and broaden access to permits via one-stop shops.
Streamline the competition
agencies and remove interest group representatives from their boards.
●Reform housing policies. Free up resources by reducing housing
subsidies and raise the real estate
tax rate to be neutral vis-à-vis other capital taxation. Abolish rent
regulation and stop subsidisation
of the rental sector.


http://www.oecd.org/dataoecd/48/20/38088858.pdf

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