Read

Search form

Exclusive: Denmark Announces 61% Tax on Oil Companies to Fund Clean Rail Project

Exclusive: Denmark Announces 61% Tax on Oil Companies to Fund Clean Rail Project
Tue, 11/5/2013 - by Jonas S. Hansen

The small Scandinavian country of Denmark has a global reputation when it comes to being at the forefront of renewable energy and green technologies. But the country's old-fashioned diesel trains, which are among the last of their kind in Northern Europe, have not been replaced for decades. Now, a plan to tax big carbon emitters threatens to do that, and more.

The Danish government recently announced a $5.2 billion investment to modernize the country's rail system and put new trains on the tracks to replace the old ones. The new trains will be high speed, electrically driven, and will pollute far less. It represent the biggest single investment in infrastructure in Denmark’s history and will reduce CO2 emissions significantly.

Funding for the project will come from restructuring the country's resource taxation system: by forcing 11 oil companies that drill in the seabed of Denmark's North Sea to pay a higher tax.

The area has brought billions into the pockets of oil corporations for decades. Today, the companies pay different tax percentages depending on their original terms of negotiation. With the new plan, they will all be taxed at the same level — around 61 percent — and it is to few people's surprise that the companies are protesting the increase.

Moving Investments Elsewhere

After the tax hike announcement, the German-owned company Bayerngas and the American-owned Hess threatened to pull out investments from Denmark. According to Arne Westeng, director of the Bayerngas Danish branch, the new tax is nothing short of unfair.

“It will unfortunately have the consequence that we can't count Denmark as a safe place to invest in. We therefore have to say, to all who ask us, that we have to advice them [against] investing in Denmark due to hostilities towards foreign companies and because of the big uncertainties about the framework of taxation in the country,” he said in a written statement.

Earlier, the company had been looking forward to a deal where it could subtract all taxes based on its investments. In that case, Denmark would not have seen any tax money based on the billions of dollars worth of oil drilled out at the earliest in 2018.

The Danish state may loose approximately $4.2 billion in tax revenues due to lost investments, and lost jobs that the investments would have created, added Westeng. Bayerngas has since announced it will be moving its future drilling investments to Norway and England.

No Loss for Denmark

Rebutting the oil industry line, Denmark's Climate Minister Martin Lidegaard say he does not think the Danish state will lose money by taxing oil companies higher. On the contrary, he believes that even if Bayerngas and Hess stop investing, others will take their place so long as there are still huge profits to be extracting oil.

It is in the interest of Denmark, Lidegaard said, to force the oil companies to pay to help fund the infrastructure they also benefit from by operating in the country -- including the establishment of a new and improved railway system and better trains.

“When we make the calculations, we look at how much oil there is out there, and how much that will be profitable to extract," Lidegaard said. "Our expectations are that there is oil, and that it will be profitable even with the new taxation to extract it -- no matter who does it.”

He added, "I am sorry if Bayerngas feels that we have treated them badly, but I am not afraid that Denmark will become an area that no one will invest in,” pointing out that Norway, where Bayerngas wants to move its investments, has a higher tax on oil extraction than Denmark.

Finally, said Lidegaard, it is in the interests of the Danish people to impose the tax. “It is a delicate balance. On the one side, we have to make sure it is attractive for the private companies to invest. On the other hand, we have to secure that Danes are getting the most out of it. It is their oil, after all.”

Many Benefit from Improved Infrastructure

From the point of view of the Danish population, the tax money will have a certain positive impact. Calculations from the country's Economic Council of Labor Movement show that the new infrastructure project will create around 20,000 new jobs, mainly in the construction of the railway system.

The new train network will be cheaper to run and much cleaner because the diesel trains will be taken out of service -- and because many more will be encouraged to take the train instead of going by car or plane, once there is a cost parity. Surveys show that once the time it takes to travel between major cities decreases, more people will choose trains in the future.

Earlier Tax Deals

One of the big stones in the shoe of Denmark's tax planners is the deal worked out by the former Danish government, in 2004, which gave an exclusive tax deal to Chevron, Shell and Maersk Oil. After negotiations, the former Minister of Economy and Commerce, Bendt Bendtsen, gave the companies a taxation rate 23 percent lower than the rate originally put forward by an expert committee. The committee was tasked with finding a level tax where companies would see a high profit, and the Danish state would receive a high yield as well.

Besides getting a lower oil tax, those companies were given contracts that ensured they would be compensated if any future government should raise taxes in the next 40 years. The clause made them practically immune to any change in taxation that the Danish government could choose to make. Economists estimate that the special tax deal and the immunity for those corporations cost Denmark as much as $23 billion in lost tax revenues.

Corruption Charges Against Former Minister

Speculations about the competence and political independence of the negotiator, Bendt Bendsten, were also raised after the 2004 deal was struck. Bendsten was later accused of corruption on several counts; he has admitted that he received expensive travel, expensive hunting and golf tours, tickets to expensive events and other lucrative gifts from big companies, including a Formula 1 race trip to Belgium paid for by Shell, one of the three companies that got the exclusive deal.

Bendtsen was cleared of corruption charges, but fined for tax avoidance based on the so-called gifts he received. According to Bendtsen, the only purpose of the trips and the tours was work. “I have had incredibly many meeting with people from the business world. It was my job as Minister of Commerce. I have met people from the business world in my office, over a lunch – and yes, also on the golf course and during hunts,” he said to the Danish newspaper BT.

Scandal aside, other oil companies are now protesting that they won't be seeing the same deal as Chevron, Shell and Maersk Oil. The German state of Bavaria, home to Bayerngas, has started pressuring the Danish government, as has the German embassy in Denmark, arguing that the new tax is unfair.

Special Deal for Hess

The American-owned company Hess, headquartered in New York City, is also rumored to have received special treatment. When other oil companies were ordered to pay the new tax of 61 percent, Hess was apparently given a choice to stay out of that deal and only pay 27 percent.

According to a source close to the negotiations, the special tax deal for Hess was offered for “political” reasons that have not yet been made public.

Add new comment

Sign Up

Article Tabs

anti-fracking protests, Keep It In the Ground, protester arrests, undercover agents

Emails obtained through an open records act request show that the Lakewood Police Department in Colorado collected details about a BLM oil and gas lease protest from undercover officers as the event was being planned.

Greek privatizations, transit privatization, Panhellenic Railway Association, TrainOSE, water privatization, Thessaloniki Water Supply & Sewage, Greek austerity policies

Late last month, the Panhellenic Railway Association took to the streets to protest a slew of public transport privatizations scheduled to take place later this year. "The government defiantly and shamelessly gives away the national wealth," it said.

#WebOfDenial, climate denial, fossil fuel industry, Exxon climate lies

In the U.S. Senate, champions for climate action and accountability are loudly putting the blame on think tanks and denier-for-hire front groups that have created doubt about climate science.

Universal Credit, Citizen’s Advice Scotland, U.K. austerity policies, welfare benefits reform, Citizen Advice, New Policy Institute, welfare payment delays

Claimants are facing hefty delays in receiving benefits and unfair sanctions.

ISTANBUL, Turkey

Soldiers versus police versus a mob in the newsroom of Turkey’s most-watched news channel — and dozens of reporters to document it all.

This week we prepare activists for what they might encounter as they take to the streets for justice and equality.

Posted 4 days 10 hours ago
Sherry Hernandez, Senka Huskic, housing crisis, foreclosures crisis, mortgage-lending crisis, Countrywide, PennyMac, CitiMortgage, Trustee Corps, foreclosures fraud, banking crimes, TARP, HAMP

"If we had known from the beginning how corrupt the system was, we probably never would have started."

Posted 5 days 10 hours ago
Pakistan climate impacts, climate change in Pakistan, extreme flooding, glacial melt

Glaciers are melting, extreme floods are becoming commonplace, and the country's infrastructure is struggling to keep up as climactic changes wreak havoc, threatening people's daily existence across Pakistan.

Posted 6 days 9 hours ago
Greek privatizations, transit privatization, Panhellenic Railway Association, TrainOSE, water privatization, Thessaloniki Water Supply & Sewage, Greek austerity policies

Late last month, the Panhellenic Railway Association took to the streets to protest a slew of public transport privatizations scheduled to take place later this year. "The government defiantly and shamelessly gives away the national wealth," it said.

Posted 2 days 10 hours ago
#23ways, 23 ways, Black Lives Matter, police brutality, We Are Here Campaign

Beyoncé, Alicia Keys, Rihanna, Jennifer Hudson, Pink, Bono, and others explain why it's time to take action to heal the long history of systemic racism in America.

Posted 5 days 10 hours ago
Black Lives Matter, police brutality, police killings of blacks, police killings of Latinos, Andy Lopez, David Sal Silva, National Council of La Raza, Jorge Ramos, Latino activists, Latino Donor Collaborative, Community Alert Patrol, Chicano activists, Bl

Is the media to blame for Latinos’ absence in the debate about police-community relations?

“Reverse redlining” flooded communities of color with toxic mortgages, practically ensuring default.

Turkish coup, Recep Tayyip Erdogan, military overthrow

Authorities have rounded up nearly 3,000 suspected military plotters, ranging from top commanders to foot soldiers.

anti-fracking protests, Keep It In the Ground, protester arrests, undercover agents

Emails obtained through an open records act request show that the Lakewood Police Department in Colorado collected details about a BLM oil and gas lease protest from undercover officers as the event was being planned.

Rooftop Revolutionaries

A street-art, activist inspired lyric video off of Rooftop Revolutionaries' WHITE EP, Sick, Tired & Wasted.