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TAX FRAUD

Denmark hits German bank with multi-million euro fine over tax fraud

Denmark slapped a German bank with a fine of 110 million Danish kroner (14.7 million euros) on Monday in a case which is part of the biggest fraud scandal the Scandinavian country has seen.

Denmark hits German bank with multi-million euro fine over tax fraud
Denmark's Tax Authority (Skattestyrelsen) in Copenhagen. Photo: Niels Christian Vilmann/Ritzau Scanpix

The case relates to the European “cum-ex” tax scam. 

North Channel Bank was found guilty of facilitating “1.1 billion kroner (that) was unjustifiably paid out from the Danish treasury,” according to a statement by the Danish Prosecution Service.

The German bank admitted its role in the fraud case and accepted the fine at the district court in the Copenhagen suburb of Glostrup, the statement continued.

The case is part of a wider affair in which Denmark is estimated to have lost 1.7 billion euros to fraudulent tax return claims.

First revealed in Denmark in 2015, it is considered the largest case of tax fraud in the history of the country, which is now revising its tax code.

The scam centred around companies, funds or individuals using a system of exchanging stocks in companies to claim multiple tax rebates for a single dividend payout.

The so-called “CumEx-Files”, an investigation published last October by big-name European outlets including German public broadcaster ARD and French newspaper Le Monde, showed that the practice was also used around Europe, costing Germany 7.2 billion euros and Belgium 201 million euros since 2001.

Danish prosecutors said the crime was committed when a number of actors made several fictitious stock trades to create “a paper trail,” and that the bank played a “crucial role” in its creation.

Capital gains made on the Danish stock market are normally taxed at 27 percent, but treaties between Denmark and certain countries allow beneficiaries based in these countries to be refunded all or part of this tax.

“It's very satisfying that we now have the first conviction in a court in the dividend cases,” prosecutor Kirsten Dyrman, said in a statement.

“All together this is the biggest fraud case in the history of Denmark, and has resulted (in) a significant loss for society and the treasury,” she added.

In March, Danish tax authorities reported that they had taken legal action against 470 individuals and companies related to the affair.

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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?

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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