Denmark’s pensions and insurance lobby group has announced that pension return tax (PAL) produced DKK48bn (€6.5bn) in revenues for the state last year, and more than twice the nation’s income from oil and gas over the last 10 years – but it said worried lawmakers were ignoring the sector’s contribution when it came to imposing more levies.
Andreas Østergaard Nielsen, head of analysis at Insurance and Pensions Denmark (IPD), said: “Through taxes too, the insurance and pension industry makes a massive contribution to the society we belong to.”
”Over the last 10 years, tax revenues from the PAL tax have been twice as big as revenues from the North Sea,” he said.
Denmark’s revenue from oil and gas extraction in the North Sea once produced extraordinarily high levels of income for the state, in years when oil prices were high, IPD said, adding that this has since dwindled as less oil and gas is extracted.
But IPD was concerned that politicians tended to take the industry’s contribution for granted, he said.
“We have recently seen it with the introduction of a special tax formulated as an additional contribution to society,” Østergaard Nielsen said.
He said few people knew about or paid attention to PAL tax – which amounts to 15.3% of the annual return on pension savings – as it did not appear on their tax returns. But it constituted a significant contribution to the state treasury, he said.
“In fact, the tax on pension returns provides as much income as all land debt tax (grundskyld) and property value tax together,” he said.
Østergaard Nielsen said most Danish pension providers generated investment returns of between 6% and 8% in 2020, which had been “a turbulent year” on financial markets, with the financial sector’s “secret social contribution” therefore yielding DKK48bn for the treasury.
Revenues from the PAL tax fluctuated according to how financial markets fared, IPD said, with 2019 having been a record year in which the tax garnered DKK63bn for state coffers.
Over the last 10 years, PAL revenues had been around DKK30bn a year on average, it said.