The Danish – and Nordic – social model is popular, but costly. While there is no mood for tinkering with the welfare state’s core elements, the government has introduced a package of reforms aimed at retaining the country’s top spot as an attractive business environment.
This has, to put it mildly, not gone unnoticed.

In 2015, Microsoft will consolidate its choice of Denmark as a key location for operations. A staff of 900, including employees at a strategic international development centre, will move into a brand new facility north of Copenhagen tailored to the software giant’s needs.
The new building is located close to the Technical University of Denmark. This is deliberate as it will allow the Danish arm of the company, with its engineers representing more than 40 nationalities, to benefit from an exchange of knowledge with a high level education and research institution. The decision by Microsoft can also be interpreted as an affirmation of the attractiveness of Denmark as a base for business.
The country offers a skilled and innovative workforce, fuelled by a free education system and other welfare state features, as well as a set of favourable conditions for international businesses.
However, just as a car needs a check of vital parts and functions on a regular basis, so does a welfare state. This, the Danish government and parliament are aware of.

The social model is popular but it comes with a high price tag. At the same time, politicians always keep a watchful eye on how the country fares in the international marketplace. Denmark, being a nation not gifted with a wealth of natural resources, is dependent on the production and selling of value- added products and services in a close interchange with other countries. Competitiveness is a must.

Taken together, these considerations have led to a package of reforms in 2013 that comprise a mixture of adjusted welfare benefits and a lowering of the corporate tax rate, plus other incentives for the private sector. The benefits targeted are the so-called kontanthjælp, a social security benefit intended for healthy individuals who are not able to earn an income to support themselves, and the student grant (SU).

The Danish Model
- Denmark offers universal health care with free access.
- Education, including at university level, is also free of charge.
- The social security net is very tight, with government benefits for a number of groups in society going beyond the poor, disabled and elderly.
- Families are a priority. There is one year of leave to be shared between the parents when having a child. Day care for the children is subsidised, and furthermore, parents are given quarterly child benefit payments.
- Students receive a government grant to finance their cost of living.
- Having entered the labour market, people without a job are entitled to social security benefits if they don’t receive unemployment benefits (and are actively looking for work).

Corporate Tax Rate
Denmark will lower its corporate tax rate gradually to 22 per cent by 2016. Currently the Danish rate is 25 per cent. The European Union average is 22.85 per cent. The OECD average is 25.32 per cent.

*The United Kingdom will lower its corporate ta x rate to 21 per cent by April 1, 2014.
**Norway has announced plans to lower the corporate ta x rate to 27 per cent in 2014.

Source: KPMG 2013.

Focus Denmark 1/2014
by By Regner Hansen, freelance journalist
Photo by: Niclas Jessen/VisitDenmark.com