Denmark Reveals Calculation Behind Capital Pension Tax Revenue

Denmark’s government estimates that savers will transfer 13.5 billion kroner ($2.3 billion) from capital pensions into a new taxation plan next year.

The estimate forms the basis for the 5 billion kroner in proceeds the government has forecast it will book next year, Finance Minister Bjarne Corydon said in a reply to parliament, received yesterday by e-mail.

“Should the amount that is transferred from capital pensions be larger, the one-time proceeds will exceed the estimated 5 billion kroner,” Corydon said. “Should 10 times the amount be transferred, the proceeds will be 50 billion kroner in 2013.”

The government wants to block Danes from deducting capital pension contributions from tax, and instead make it tax-free for savers to draw their funds after retirement. Savers who shift to the new plan next year will be taxed 37.3 percent, compared with a 40 percent rate that the government plans to charge in subsequent years.

Revenue next year from the government’s capital pension tax could “theoretically exceed the budgeted amount by quite a substantial margin,” Corydon said in an interview this week. ““Our official estimate is conservative.”

To contact the reporters on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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