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Denmark and Sweden to ‘think about’ ECJ tax ruling

NORDICS - Both the Danish tax ministry and the Swedish finance ministry said they will need time to evaluate the ruling the European Court of Justice (ECJ) has issued on Danish pension tax.

"We were not really surprised given the Advocate General's opinion stated in June last year," a spokesman for the Danish tax ministry told IPE. "But you do hope till the last moment, don't you," he added explaining that the ministry will look into the verdict in detail over the next two weeks.

Yesterday, the ECJ had ruled that Denmark is in breach of European law on freedom of movement of workers and capital by not granting tax-deduction on contributions to pension contracts with foreign insurers.

Sweden's finance minister Anders Borg, whose country has a similar case pending with the ECJ, had commented at a summit in Brussels that the government would analyse the verdict and its possible implications for Sweden. The country had also intervened on the side of Denmark.

"I hope that the remaining member states will take the ruling into account and also modify their legislation," László Kovác, European Commissioner responsible for Taxation and Customs, commented on the ruling, adding that he was "very happy" about it.

He pointed out that this "is the culmination of almost six years of work by the Commission to create a single market for occupational pensions without a tax obstacles". Kovác added that during that period several member states had already amended their legislation.

Meanwhile, a Swedish market source fears a massive tax outflow because of the verdict.

"Both Denmark and Sweden do have to watch out now," Mikael Nyman, editor of the Swedish financial newsletter Pensioner & Förmåner, told IPE. He pointed out that everybody who wants to put their pension money with a foreign insurer now might be allowed to do so, even if a change in the legislation is still years away.

Nyman is convinced that Swedes, "as we are very tax-evasive in this country", will be quick to move their pension money from the high-tax environment in Sweden. This will make tracking the pension assets much harder. Currently the government is making SEK16bn (€1.8bn) per year out of tax on pension fund returns which might now be at stake, explained Nyman.

He could even imagine that Sweden could decide to withdraw its own case pending with the ECJ.

According to him the best solution for the problem would be an EU-wide harmonised tax legislation. "We are going to have a pan-European market faster than we thought," he concluded.

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