The firing of Jesper Rønnow Simonsen comes after months of political pressure after it was discovered that agency had been hit by multi-billion kroner tax fraud.
Last August, it was discovered that Skat had failed to act on numerous warnings that foreign companies had drained the national system by applying for dividend tax refunds “for fictional share holdings, based on falsified documents."
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.
Skat's investigations revealed in August 2015 that "a large network of companies abroad” had abused the system.
”The expected criminal fraud in refunds has so far been calculated based on 2,120 individual claims totaling some 6.2 billion kroner in the 2012 to 2015 period," Skat said at the time.
The total cost of the fraud is now estimated at at least 12.3 billion kroner ($1.9 billion, €1.7 billion).
The agency has also been plagued by problems with its tax collection IT system that could amount to a total loss of some 14 billion kroner.
On Friday, Politiken reported that the Danish government plans to write-off some 7 billion kroner in Danes' debt because the IT problems mean that it would cost more money to pursue the debt manually than the collections would bring in.
According to Politiken, Danes' have a cumulative public debt of around 90 billion kroner, including some 19 billion in unpaid personal taxes.
Dennis Flydtkjær, the tax spokesman for the Danish People's Party, said he applauded Tax Minister Karsten Lauritzen's decision to remove Simonsen from his post.
“Simonsen has been the director during these huge scandals,” he told Ritzau.