DENMARK - The Danish government has made changes to the bill on pensions taxation, delaying the effective levy on asset management costs but ratcheting up tax costs in two other areas to achieve a similar goal.
Pensions industry association Forsikring og Pension (F&P) reacted by accusing the government of using pensions money to plug a hole in state finances.
In a statement, tax minister Thor Möger Pedersen said: "In conjunction with the external consultation and progress of the bill in parliament, it was shown in the meantime that the proposed bill cannot be passed in its current form."
The L28 proposed law on pensions taxation would now not include the abolition of the tax deduction for asset management costs, he said.
Instead, the withdrawal of this tax deduction would be effected "in a more indirect way, which is easier and quicker for financial and pensions institutions to implement," he said.
The PAL tax on investment returns in pension schemes will rise by 0.3 percentage points to 15.3% at the beginning of next year, with the ceiling on annuity pensions cut to DKK50,000 (€6,725) from DKK100,000 - instead of to the DKK55,000 originally proposed - also with effect from January 1, 2012.
However, Möger Pedersen said the tax deduction measure would still be introduced, but not until 2014 and after a consultation with the pensions industry over the concrete formulation of the law. At that point, the PAL tax would revert to 15% and the ceiling on annuity pensions would increase to DKK55,000 a year, he said.
F&P's Managing Director Per Bremer Rasmussen said the tax ministry was wrong when it justified the lower annuity pensions ceiling with the reduction in proposed taxes on asset management costs.
"The 0.3% in extra PAL tax gives exactly the same revenue in 2012 as the abolition of the deduction - namely DKK400m," he said, citing the association's own calculations and the figures in the government's economic statement in August.
"We can only see one explanation: The government is now collecting even more pensions money to finance a hole in another part of the state finances," he said, adding that this was "completely untenable".
Bremer Rasmussen went on to say it could create a dangerous precedent if the government thought they could dip into pensions assets when they were short of money elsewhere.