Greenland is planning reforms to reduce expenditure and increase revenue. A finance bill and a proposal to relax the law on dividends will be debated in the Greenland Parliament at the end of the month.
As we reported on Monday, the Greenland Parliament will have a busy start to the new political year. Among the projects submitted to the legislature by the Greenland Government, Naalakkersuisut, is a draft revision of the Finance Act 2024. Presented by the executive on August 8, it is based on a number of different points.
After taking inflation into account, the estimated growth rate for Greenland is 0.8% in 2023. Inflation for the year is estimated at 5% – in January 2023, inflation in Greenland was 2.75%, well below Denmark’s 8.4%.
With an unemployment rate of 3.7%, the number of jobseekers has not been so low for more than ten years, leading to a shortage of labour in certain sectors. In addition, the value of exports, mainly linked to the fishing industry, has increased by 22% compared to 2021. The island exports 98% of its seafood, generating DKK 5.8 billion (over €777 million).
Despite what may appear to be a fairly positive balance sheet, the government fears that public finances will plunge into the red if reforms are not undertaken to reduce expenditure and increase public revenues. Hence the presentation of a sustainability and growth plan based on four reform axes designed to ensure Greenland’s economic stability: raising education and skill levels; guaranteeing sustainable growth and transition to a multi-pronged economy; ensuring the public sector sustainability; and reforming the tax system as well as social, housing and elderly benefits.
The Greenland government also wants to focus on youth, health and the elderly, with new family allowances, increased recruitment efforts in the health sector and improved training in the fishing industry. On that specific subject, funds of over DKK 1 million (more than 140,000 euros) have been earmarked for the launch of a bachelor’s degree in Arctic biology.
In its Finance Act 2024 proposal, the Ministry of Finance and Equality further believes that public sector funds should be used with the aim of encouraging society’s growth to rely more on the private sector.
It’s perhaps with this in mind that Naalakkersuisut presented a proposal last week to amend the law in order to make investment on the island more attractive by relaxing the tax relating to dividends. The project is aimed in particular at companies that have a license to exploit raw materials or hydroelectricity, as well as companies that commercially exploit ice and water.
Submitted to economic circles, the project did not arouse enthusiasm, rather raising doubts and concerns as to the truly positive effects of a change in law and the costs it would generate for its implementation. After examining the government’s proposal, neither the employers’ organisation, Grønlands Erhverv, nor the Bank of Greenland expressed a positive opinion, considering that the project would cost more than it would bring in, creating additional public expenditure in terms of bureaucracy.
This dividend tax proposal, along with the finance bill, will be discussed by Parliament at the opening of its autumn session on 22 September.
Mirjana Binggeli, PolarJournal
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