Tax authority woes leave Danish state out of pocket by billions

Several years of technical problems at Denmark tax authority Skat have resulted in a further increase in the amount of money owed by taxpayers to the state, with the figure growing by nearly nine billion kroner from 2017-2018.

Tax authority woes leave Danish state out of pocket by billions
Photo: Sarah Christine Nørgaard / BT / Ritzau Scanpix

The increase in money owed via Skat was reported by Fagbladet 3F, based on Statistics Denmark figures.

Unpaid tax, unpaid police fines and a large amount of other unfulfilled demands for payment increased the overall debt to 117 billion kroner, the media reports.

Per Nikolaj Buch, and economics professor at Aalborg University, told Ritzau the figures were damaging for citizens’ sense of justice.

“It is very problematic for the financing of our welfare society, and an insult to the sense of justice of anyone who pays their tax, VAT and bills that there are others who do not pay their debts and owe billions of kroner,” Buch told Fagbladet 3F.

The professor named serious problems implementing a new digital reporting system, EFI, as a key reason for Skat being unable to efficiently track payments owed to it.

According to a Skat estimate, the majority of the 117 billion kroner it is owed cannot be recovered, due to individuals being too poor to pay or because the debts are tied to bankrupted companies.

Christen Amby, a tax practitioner and member of the Tax Law Council, an advisory board to the Ministry of Tax, said that individuals and companies were less likely to comply with tax rules in a dysfunctional system.

“The desire to pay tax decreases when the system for reporting does not function properly,” Amby told Fagbladet 3F.

Since Skat also carries out debt recovery for other sectors of society, the problem has the potential to spread, he added.

“That could be something like the ability to pay a police fine or a charge for taking a train without a ticket. The will to pay for these things also falls away when the billing system does not work,” he said.

READ ALSO: Denmark vows to recover billions stolen in tax fraud

Member comments

  1. I wonder when tax money funds gets tight will the relaxed Danish style of automatically trusting everyone be the big loser because of these cases?

Log in here to leave a comment.
Become a Member to leave a comment.


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.