Denmark Rating Underpinned

Moody’s Investors Service said Denmark’s diversified and open economy with evenly distributed wealth levels, underpin its ‘AAA’ rating with stable outlook, RTT reported. 

The agency said the very low public debt level and robust public finances are another important strength as is the Danish authorities’ forward-looking approach to economic policy-making, RTT reported. 

In a new report named “Government of Denmark—Aaa Stable; Annual Credit Analysis”, Moody’s said the credit strengths outweigh the risks linked to the elevated level of household leverage as well as the large size of the Danish financial system. 

The agency observed that the government’s debt burden as a share of GDP is among the lowest in the Aaa rating category at around 40% of GDP. 

Denmark’s population is about half that of Sweden’s, but the number of initial public offerings in the two countries is not proportional. Over the last four years, Sweden had 81 IPO’s while Denmark only had four.

Denmark’s minister of economic and business affairs, Brian Mikkelsen, thinks the difference is a matter of taxation. Swedish investors pay 30% in taxes on dividends and capital gains from stock holdings. In Denmark the corresponding tax rate is 42%. To be competitive, Mikkelsen wants to reduce this figure to 27%.

“Our high taxation of capital is one of the biggest obstacles for growth right now,” Mikkelsen said. “Because taxes on capital contribute to preventing us from raising proper financing for our companies.”

Mikkelsen hopes that lowering the tax rate will make Danes more interested in investing in stocks, bringing more capital to the market and thereby making it easier for Danish companies to access financing.