Denmark hit by potential billion-dollar tax fraud

Denmark's tax authority said Wednesday it had alerted police after foreign companies appeared to have drained 804 million euros from the system in what would be the country's biggest-ever tax fraud.

Denmark hit by potential billion-dollar tax fraud
Tax Minister Karsten Lauritzen. Photo: Claus Bech/Scanpix
“Over the summer we became suspicious after receiving information from a foreign authority,” said Jesper Ronnow Simonsen, head of the Skat tax agency.
“Our own internal investigations have strengthened our suspicions and we have therefore turned the case over to the police,” he said in a statement.
Danish police confirmed the investigation, saying the case — which involves a sum of 6.2 billion kroner ($918 million) — was top priority.
A Skat spokesman was not willing to disclose which country had flagged up the matter to Denmark.
The case involves returns on stock, including dividends, in Danish companies paid to foreign companies.
Dividends normally carry a 27 percent tax in Denmark. Under double taxation agreements, however, foreign companies based abroad are entitled to a refund of part or all of the Danish tax, if they have paid tax on the dividend in their country of domicile.
Simonsen said Skat's investigations showed that “a large network of companies abroad have apparently applied to have their dividend taxes refunded for fictional share holdings, based on falsified documents.”
“The expected criminal fraud in refunds has so far been calculated based on 2,120 individual claims totalling some 6.2 billion kroner in the 2012 to 2015 period,” Skat said.
The Danish police's Special Economic and International Crime unit (SOIK) said the case was a top priority.
“The treasury and society have possibly been robbed of very considerable funds… We have a major investigation ahead of us. I envisage a long hard haul to find out what has happened,” National Prosecutor Morten Niels Jacobsen said in a statement.
Neither the tax authority nor the SOIK would disclose any information on the cases, or name any of the companies involved.

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Denmark scraps popular tax deduction for home improvements

A tax deduction for home improvements, the “håndværkerfradrag”, is to be scrapped in 2022 after parties agreed to end it in next year’s budget.

A popular tax subsidy for home improvements, the
A popular tax subsidy for home improvements, the "håndværkerfradrag", will end in Denmark on April 1st 2022. Photo: Signe Goldmann/Ritzau Scanpix

The government, along with its left wing allies Red Green Alliance, Social Liberals and Socialist People’s Party; and minor parties Alternative and the Christian Democrats, presented the 2022 budget on Monday, including an agreement to drop the home building subsidy.

Sofie Carsten Nielsen, leader of the Social Liberals, said “we are dropping the building subsidy that has ignited the already overheated housing and construction market”.

READ ALSO: Four ways to (legally) lower your tax bill in Denmark

The tax deduction will be removed from April 1st next year. Other tax deductions that can be applied for home services, including cleaning and childcare, are retained.

Tax subsidies for people who hire services in their homes, termed boligjobordningen, were broadened last year as part of government measures to support the economy during the coronavirus crisis.

The provision allowed for a higher tax deduction for the encompassed home services.

Demand for builders has since increased so dramatically that supply can no longer meet demand. As such, the parties behind the budget deal reason that the deduction is no longer needed.

Additionally, the Danish central bank, Nationalbanken, has warned that high demand could contribute to an overheating of the housing market.

Although the deduction was adjusted five years ago to favour green home improvements, the government’s allied parties still maintained they wanted to scrap it.

Nielsen said on Monday that the deduction has put Denmark’s building trade under strain.

“This is an economically responsible budget which also contains huge green decisions,” the Social Liberal leader said.

Finance Minister Nicolai Wammen said that the deduction would remain applicable to other trades, including cleaning, in order to prevent cash-in-hand arrangements.

“The biggest challenge we have in regard to the Danish service industry is in building and extensions. That’s why we are revoking the building element of the (subsidies),” Wammen said.

“But we are very concerned with keeping down cash-in-hand work in the service sector,” he added.