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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.

Published: 28 May 2019 13:15 CEST
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?

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TAXES

Beskæftigelsesfradraget: What is Denmark’s employment allowance?

Denmark's government may soon announce changes to its tax reform plans, which will give all wage earners a bigger employment allowance. What is this and how will it affect foreigners' earnings?

Published: 30 October 2023 15:21 CET
Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance? 

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes. 

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner. 

How did the government agree to change the employment allowance in its coalition deal? 

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment  allowance to 12.75 percent up to a maximum rebate of 53,600 kroner. 

How might this be further increased, according to Børsen? 

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance. 

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement. 

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.  

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