DENMARK - The Danish ministry of taxation says it needs another month before ending discrimination against pension polices bought from foreign-based providers.
Denmark has an unusual system of taxing investment income on pension savings, as well as the eventual benefits. A ministry official put the tax on investment yields at DKK14-19bn (€1.88-2.55bn), depending on the performance of financial markets.
The Danish Insurance Association, which represents public-sector occupational retirement schemes as well as insurers, put the figure even higher.
The ministry is concerned to ensure that in ending discrimination, it does not haemorrhage the existing take on investment income as Danes look abroad for a pension policy.
Last month the European Court of Justice ruled that Denmark could not continue to charge a higher rate of tax on investment income of pension polices bought from foreign providers.
The DIA does not believe that in obeying the ruling, the Danish state will lose existing revenue. According to Anne Seiersen, head of department at the DIA, the tax discrimination has dissuaded all but a negligible sum of people from purchasing foreign-based policies.
But the ministry is nervous lest abolition of discrimination encourages foreign providers to create schemes that lure Danish money abroad, possibly illicitly.
"It is harder for our ministry to control what is going on abroad, " said Seiersen, adding that Danish providers have no reason to fear fair competition.
Sweden finds itself in a similar position to Denmark. Following the ECJ ruling, one leading commentator feared that Swedes would seek ways to move their money to lower tax environments. "We are very tax-evasive in this country," said Mikael Nyman, editor of the Swedish financial newsletter, Pensioner & Förmåner.
Seiersen believes that the Danish state can prevent such abuses by refusing to permit contributions to leave the country unless the provider and policyholder provide sufficient information for the ministry of taxation to track the policy. The European Commission is understood to support this strategy too.