The Danish economy is only slowly and very unevenly recovering from the financial crisis which is sweeping across most of Europe, says the OECD. Productivity growth is one of the main problems.
Denmark’s low productivity growth makes it difficult to achieve growth and create new jobs. The country’s productivity has not increased while main trading partners Germany and Sweden have experienced a marked increase in productivity.
As a result the OECD suggests several economic reforms for the Danish economy, including an increase in property tax and reduced income tax. The top tax rate, paid by high earners, should be reduced.
The OECD also recommends a reform of the special disabled employment programme (Fleksjob) to make it more targeted and less generous. Fleksjob gives citizens with reduce working ability the chance to find employment covered by wage subsidies.
The OECD’s economists praise Denmark for reforming its early retirement scheme and retirement age, and the OECD also supports the government’s kick-starting of the Danish economy and its plans to introduce expenditure ceilings for municipalities which would tightly control their budgets.
The Danish government is expected to introduce a tax reform in 2012, yet despite the OECD’s recommendation it will not include any increase in property tax, according to Minister for Economic and Interior Affairs Margrethe Vestager (the Danish Social Liberal Party). This is because property taxes were ring- fenced in the coalition agreement covering this parliamentary term.