CORRECTED-Danish PM announces tax cuts under plan to boost languid economy

08/30/2016 7:59

(Removes erroneous description "center-right" for Liberal Alliance in paragraph 8)

COPENHAGEN, Aug 30 (Reuters) - Danish Prime Minister Lars Lokke Rasmussen on Tuesday announced a plan to boost Denmark's sluggish economic growth, with proposed measures including income tax cuts to entice people to work and raising the pensions age.

Rasmussen, of the conservative Venstre party, leads a minority government and is struggling to meet the conflicting demands of his political allies, including on welfare and taxes. Some parties have warned that there could be a snap election in the autumn if their demands are not met.

Denmark's economic growth is lagging behind neighbors Norway, Sweden and Germany, and some economists and politicians partly blame the country's generous welfare system and high tax burden.

The government has trimmed its economic growth forecast for 2016 and 2017 to 0.9 percent and 1.5 percent, respectively, partly due to the UK's vote to leave the European Union.

"We risk falling behind, and risk that our children won't have the same welfare and possibilities as their peers in Germany or Sweden," Rasmussen said at a news conference to announce the plan.

Under the proposal income tax would be lowered for those earning incomes below 1 million Danish crowns ($150,000) a year by 2025, and the top marginal tax rate would be lowered to 10 percent from 15 percent.

All measures in the plan are subject to parliamentary approval, with political negotiations to take place between now and year-end.

The Liberal Alliance had made the lowering of the top marginal tax rate a key demand, threatening to withdraw support for Rasmussen's government if it was not met.

The prime minister also proposed raising public spending by 0.5 percent per year to 22 billion Danish crowns in 2025, with a focus on care of the elderly, education and security.

The plan also envisions raising the pension age earlier than previously planned to 67.5 years in 2025, up from 67, and to 68 years in 2030.

Rasmussen said Denmark's immigration policy would also be tightened further, as well as measures to make real estate investments less attractive by reducing interest deductions. (Reporting by Jacob Gronholt-Pedersen, additionel reporting by Erik Matzen; Editing by Raissa Kasolowsky)

08/30/2016 7:59