PM: No new tax cuts

Labour shortages prevent tax cuts for the time being, the prime minister maintains

Tax cuts are not an option right now, said PM Anders Fogh Rasmussen at the Liberals' parliamentary group meeting in Ringsted last week.

Rasmussen's statement offered a contrast to the call of his coalition partner, the Conservatives, to reduce income taxes as a way address labour shortages. Such a measure would have the opposite effect, however, said Rasmussen.

'There's a shortage of labour and it would be quite irresponsible to reduce taxes which would then have to be rolled back with tax and fee increases because the economy is overheated,' said Rasmussen.

Cutting taxes would merely destabilise the economy, said the prime minister. Resources should be spent instead on improving public service.

'We confront some completely new challenges in the coming years. It's already become difficult to recruit employees for major sectors of public service.'

Business leaders disagreed with Rasmussen's stance, however, and called for a prompt tax reduction.

'We expect the government to live up to its platform and that significant tax reductions be instituted before the next election,' said Tine Roed, vice president of the Confederation of Danish Industries. 'The sooner the better, because the most efficient way to increase the supply of labour is through lower taxes.'

Rasmussen emphasised that his statements covered the expected situation in 2007. The prime minister chose not to disclose, however, whether tax cuts could play a role in the government's long-term economic plan, to be presented in the spring.

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