Photographer: Chris Ratcliffe/Bloomberg

A $15 Billion Tax Scandal Triggers Probe Into Danish Errors

  • Finance minister discusses his role in Danish tax failures
  • Internal report shows only a fifth of losses can be recouped

Denmark will start an investigation into years of mismanagement and fraud that resulted in the country’s tax department losing about 100 billion kroner ($15 billion).

Prime Minister Lars Lokke Rasmussen said Denmark needs to find out what went wrong if the state is to maintain confidence in the revenue generation that is the backbone of one of the world’s most coveted welfare systems.

The “trust that has been built up through generations can be lost in a single second,” Rasmussen told parliament on Tuesday. “If that happens, the foundation on which our welfare state rests will crumble.”

The investigation was demanded by the Danish People’s Party, an anti-immigration group that isn’t part of the ruling coalition but on which Rasmussen relies for support, and the opposition Social Democrats. They cited a recent internal report, which showed that the state may only be able to recoup about one-fifth of the money lost.

It’s the latest in a series of revelations pointing to incompetence at Denmark’s tax department after years of staff cuts and failed efforts to digitize data collection.

Social Democrat Leader Mette Frederiksen, in a joint statement with the head of the Danish People’s Party, called the “crisis” at Denmark’s tax department “one of the biggest scandals in recent time.”

Denmark has already tried to address the failings. In August, Tax Minister Karsten Lauritzen fired the department’s top bureaucrat and promised about 7 billion kroner in additional spending to improve revenue collection. The plan also entailed hiring about 2,000 more employees.

Rasmussen said his tax minister “will now summon parties to settle on how we get this done.”

Kristian Jensen, the current finance minister who was tax minister from 2004 to 2010, has said he takes responsibility for errors that occurred during his time overseeing revenue collection. He also pointed to Denmark’s municipal reform, which centralized tax collection during those years, as part of the problem.

“With the benefit of hindsight, there weren’t enough employees” assigned to the task, Jensen said, according to broadcaster TV2. He said he welcomed an official investigation into the failures that led to the loss of tax revenue.

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