VIRTEU National Workshop - Denmark

VIRTEU
NATIONAL WORKSHOP
Denmark

The VIRTEU National Workshop with a specific focus on Denmark was held on the 28th of March 2022.

During the workshop, and through a series of questions, several experts were called upon to provide critical evaluations based on their professional experience about the relation between tax crimes and corruption. The discussion aimed at shedding light on systemic weaknesses within the context of contrasting such criminal phenomena from a legal and practical perspective.

Organization and Moderation:

• Dr. Costantino Grasso

Associate Professor in Business and Law at Manchester Law School
VIRTEU Principal Investigator

• Dr. Lorenzo Pasculli

Associate Head for Research at Coventry Law School
VIRTEU Co-lnvestigator

The video recordings of the event are available below.

VIRTEU National Workshop Denmark artwork.jpg

Suggested Citation

APA: [Speaker's surname, initial(s)] (2022, March 28). VIRTEU National Workshop - Denmark, Session [1 or 2]. Video recording at [00:00]. Retrieved from https://www.corporatecrime.co.uk/virteu-workshop-denmark

HARVARD: [Speaker's surname, initial(s)] (2022) VIRTEU National Workshop - Denmark, Session [1 or 2] [Online]. Video recording at [00:00]. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark

OSCOLA: [Speaker's name and surname] ‘VIRTEU National Workshop - Denmark’, Session [1 or 2] (Corporate Crime Observatory, 28 March 2022), Video recording at [00:00], <https://www.corporatecrime.co.uk/virteu-workshop-denmark>

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National Experts:

• Benjamin Carl Krag Egerod

Assistant Professor at the Department of International Economics, Government and Business Copenhagen Business School

• Jesper Olsen

Chairman of Transparency International Denmark, External Associate Professor at the Department of Political Science of the University of Copenhagen

Project Experts:
• Alex Cobham
Economist and Chief Executive of the Tax Justice Network, Founding Member of the Steering Group of the international Independent Commission for the Reform of International Corporate Taxation

• Pietro Maria Sabella
Adjunct Assistant Professor in Criminal Law at Luiss University in Italy and Member of the European Research Center on Tax Crimes

VIRTEU NATIONAL WORKSHOP - DENMARK - SESSION 1

The first session of the workshop was devoted to the exploration of the following topics:

• The phenomenon of tax crimes;

• The complexity of the legal system and adequacy of the legal definitions;

• The potential deficiencies of the legal system;

• The sectoral vulnerabilities to fraud and corruption in the area of taxation.

Interactive Table of Contents

Welcome and Introduction: Dr. Costantino Grasso
Topic 1: The phenomenon of tax crime in Denmark
Topic 2: National and transnational tax crime practices
Topic 3: Tax crime and money laundering relationship
Topic 4: Complexity of the Danish taxation system
Topic 5: Complexity and adequacy of the Danish criminal law
Topic 6: Actions against tax crimes
Topic 7: Sectors most vulnerable to tax crimes

SUPPORTING DOCUMENTS

Select Opinions and Arguments
(click on the specific timestamp in the citation for a direct link to the relevant part of the discussion)

The most relevant problematic aspects within the area of tax crimes occur in the ‘grey zones’ between tax avoidance and tax evasion. Such an issue is not only related to criminal liability but also to the effective enforcement mechanisms regarding specific interpretations of tax law (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 11:34. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

It is difficult to fully understand what types of tax crimes are most committed in Denmark, as the knowledge of that depends on the specific focus of the crimes being most investigated. As there is extensive third party reporting within the country, most of the tax crimes happen where there is self-reporting which provides an opportunity, by example within small business and false invoicing, as these are reported by the organisations themselves (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 13:04. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Reflective of the significant and frequent reorganisation of the tax authorities, this has made enforcement particularly problematic. This has resulted in the realisation that tax authorities resources and capacity have been reduced too much whereby creating systemic vulnerabilities to be exploited, and caused a change in state policy to plug these gaps by now increasing resources in attempts to reverse the harm caused (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 18:27. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Over the previous years, there has been a sustained focus on carousel VAT fraud, bankruptcy related tax fraud, and money laundering, however, it is hard to know how these compare in terms of the frequency and amount to other tax crimes, as there simply may not be as much investigation or detection of other possible widescale crimes (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 23:46. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

There have been instances where criminal culpability has not been attributed resultant of paying taxes on criminal gains, for example, if a person pays tax on a bribe it has resulted in no conviction. In effect, this allows the manipulation of the tax system to shield from criminal conviction, and moves illicit money into the legal economy (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 26:09. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

In Denmark, a high-profile judicial case on the role of professional enablers of tax abuses is currently under way. It relates to an international company that has avoided the payment of taxation through a big deduction obtained using a loophole. They had got some advice from one of the biggest Danish law firms, Bech-Bruun, and the tax authorities have sued this law firm seeking the reimbursement of the avoided tax (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 33:52. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

While being aware of the existence and context of the revolving door phenomenon, it has not been a significant public focus in the Danish context, and understandings of the impacts and effects are drawn from experiences of other countries. Notwithstanding this, there is little doubt that it occurs in Denmark, and it allows previous members of the tax authorities to advise businesses on grey or questionable tax practices that they understand will not be investigated or questioned (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 35:46. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[From a comparative perspective] speaking about the issue of funding the revenue authority in the United Kingdom there's been a long period of reducing the funding that began under the previous government around the financial crisis as a sort of genuine austerity measure and was then taken much further as something more ideological, a quite deliberate regulatory austerity. Where such a decision is made, although you do not change the rules, in practice you make the tax authority less able to function (Cobham, 2022).

Suggested citation: Cobham, Alex (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 38:39. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In relation to the defunding decision] it did happen under a center-right government and it had adverse distributional consequences. The problematic aspect is that the more complex the question of legality around the tax matter, the more resources must be dedicated to investigating and possibly prosecuting it, which creates a disincentive to challenge such complex schemes and therefore fosters environments to incentivize transgressions (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 40:32. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

The tax code in Denmark may be regarded as highly complex, however, this is accompanied with extensive third-party reporting which means on the individual level, normal people are not exposed to this complexity and the vast majority of tax matters are dealt with on their behalf. The issues therefore arrive on the corporate side, or self-employment side which requires increased levels of self-declaration. When examining this self-declaration and the complexity of the law, where a tax arrangement is sufficiently complex this disincentivises investigation through being too resource intensive with no clear outcome (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 48:38. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Within the context of lobbying to alter law making or otherwise affect rule enforcement, it may be viewed that the most common access point for lobbyists is not politicians, but rather administrators, as political ideologies tend to be too entrenched (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 59:15. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

In Denmark, the legislation does not provide for a mandatory requirement for the adoption of preventive measures to counter tax crime. However, on a voluntary basis, tax authorities organize from time to time information campaigns (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:06:52. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

There are not, to the panels knowledge, provisions for blanket tax amnesties, however, individuals or organisations are able to appeal for these on a case by case basis (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:09:39. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Payments for tax debts can only be made with money, and not other assets, however, should you be unwilling or unable to pay then the authorities may recover property to settle the debt (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:16:10. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Concerns raised by relevant bodies, such as banks, as to the existence of possible tax crimes are primarily viewed through the lens of money laundering as opposed to specific tax offenses, and are therefore passed to the police in the first instance before the police make a decision to pass it to the tax authorities (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:17:15. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

It is not necessarily sanctions within taxation laws that have the big preventative measure as the sanction is not disproportionate to the risk. The Danish system in general does not have this disproportionality, and therefore does not provide a meaningful disincentive (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:20:16. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

There is a lack of empirical study on the effectiveness of the sanctions and deterrents within the Danish system, in either the capacity as viewing punishments as means of predicting future behaviours, or for risks to punish people who make innocent mistakes, and how individuals are able to access complex tax information to avoid mistakes (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:21:49. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

The sectors of the economy most exposed and susceptible to tax crimes and corruption were identified as the construction sector, the retail sector with regards to small firms, and in the financial sector, offshoring of wealth and profits to third party states (Egerod, 2022).
Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 1 [Online]. Video recording at 1:33:42. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

VIRTEU NATIONAL WORKSHOP - DENMARK - SESSION 2

The second session of the workshop offered a special focus on the following topics:

• The role of professionals as enablers of economic crime;

• Institutional corruption and undue influence on the political decision-making process;

• Effectiveness and limits of investigative powers and anti-tax crime/corruption strategies;

• Attribution of corporate criminal liability and settlement procedures;

• The relevance of whistleblowing and whistleblowers protection.

Interactive Table of Contents

Topic 1: Enablers and facilitators of tax crimes
Topic 2: Sanctions imposed on enablers
Topic 3: The "revolving door" phenomenon and academia
Topic 4: Regulatory capture vs political capture
Topic 5: Adequacy of investigative powers and resources
Topic 6: Perception and prioritization of economic crime
Topic 7: The role of whistleblowers in fighting tax crimes
Topic 8: Inadequacy of international cooperation efforts

Select Opinions and Arguments
(click on the specific timestamp in the citation for a direct link to the relevant part of the discussion)

[In Denmark] there have been some recent scandals where accountants and tax lawyers have provided advice as to how to limit tax payments […] there's a tax advice industry that … is coming under increasing public scrutiny (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 03:12. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Where the economic system of a country is dependent on the financial sector industry there could be a tendency for the government to commercialize its sovereignty giving up a certain amount of regulatory power to the firms that provide tax professional services, with the quid pro quo that they will keep bringing in business that supports your economy. As a result, the revolving door phenomenon becomes systemic in that it can be seen as a part of the deal. So the "capture" becomes built into the economic structure and, over time, such a state of relying on the financial sector industry makes it harder to counter it regardless of which government comes in (Cobham, 2022).

Suggested citation: Cobham, Alex (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 07:07. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Trust is a fundamental element on which the Danish system is based; also, the Danish system is very complex and is considered well regulated and organized. Such elements may exert an adverse effect in that they can make the system vulnerable to exploitation. In other words, you can transfer your activities to Denmark to make them appear less suspicious and use in this way the system as a sort of tax haven. In such a scenario, the role played by tax advisors is crucial (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 09:23. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In Denmark] the problem lies with the complexity of the system. If the system was not complex there would be no basis for the advisory industry to exist. The presence of many gray areas in the rules makes this industry profitable (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 16:20. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In relation to potential conflicts of interests that may affect academic integrity in the area of taxation] one issue to be highlighted is that Denmark is a very small country, also there has been a political movement that has put pressure on the universities to let them rely more on external funding. Another relevant element is that fifteen years ago we experienced an important reform in the university sector aimed at creating a close connection between the academic world and the relevant business sectors so as to generate more impact and opportunities for consultations. This was a mistake because it has resulted in a reliance on private funding and the injection of private interests in the academic sector where there is a need for independent research (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 21:09. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In relation to the reluctance of civil servants and researchers to contribute to the debate about how to counter corrupt practices in the area of taxation] the circumstance that Denmark is a small country appears problematic. The political debate is very intense and, consequently, every time that a researcher would like to express his or her opinion such ideas may be blown out of proportion. Also, we have a general problem with the freedom of expression of public employees that are reluctant to contribute to the debate because politicians are very sensitive to criticism (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 24:10. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In Denmark] it is easier for lobbyists representing business organizations to exert their influence on the administrative level generating "regulatory capture" rather than affecting the general political level. In general, they expect to be successful when they target the very administrative part of the rulemaking where they can exploit the extreme complexity of the Danish taxation system (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 31:55. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In Denmark] the defunding of the taxing authority throughout the 2000s decreased the enforcement capabilities of the agency. What remains to be seen is whether the recent refunding has changed this situation (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 38:03. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Politics, public perception, and symbolism affect the way in which tax authorities are funded. People react more to the lack of police officers patrolling rural areas than to the need for more bureaucrats in the tax authority or investigators in the area of economic crime. To get voters' support politicians tend to use symbolism when they allocate resources (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 40:34. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[In Denmark] the general perception is still that ordinary crimes (i.e. crimes against the person or crimes against property) are more dangerous than economic crimes. The political level embraces such an idea when it prioritizes the fight against criminality. This is relevant even within the area of tax crimes where it is possible to distinguish between ordinary domestic tax crimes and international tax crimes. It is much more difficult to obtain political support to fight the latter rather than to focus on merely domestic tax criminal activities. Also, we have to keep in mind that political support is generated by events. After the money-laundering scandal that involved Danske Bank, suddenly money laundering was high on the agenda in Denmark. As a result, it is unlikely that we will be able to change the prioritization in the fight against economic crime unless we experience the occurrence of a similar event (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 43:04. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

[The issue related to the reluctance to fight against economic crime] goes beyond what is commonly perceived as the traditional conflict of interest, you cannot win elections promising to fight against economic crime. Also, there is a tendency of looking at all the recent relevant scandals (e.g., the Panama Papers, the Pandora Papers, and so on) as single events rather than as evidence of systemic issues that affect the entire administrative and political process (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 47:40. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Although several attempts have been made, there is no strong whistleblower protection in the Danish context (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 49:17. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

In Denmark, we have recently implemented the EU Whistleblower Directive at the national level. The choice has been to offer the same level of protection provided by the directive without enhancing it but, at the same time, to widen the scope of application going beyond the areas covered by the European Union treaties.
Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 50:12. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

The motives behind whistleblowing are relevant because on many occasions whistleblowers are involved and they do not commonly disclose wrongdoings without incentives. They are no saints. As a result, it is important to keep the different aspects of your whistleblower protection in balance. At Transparency International, we cooperated closely with business representatives and compliance officers in the area of whistleblower protection. They usually highlight that in their private lives their employees are involved in violation of rules such as driving too fast or tax fraud so we cannot expect that when they work in the company they become saints. So we should be inspired by the values and the work that compliance officers do in our best companies (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 52:14. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

There has been a reluctance to establish strong whistleblower protection in Denmark. We have recently implemented the EU Whistleblower Directive but it would potentially affect only larger firms and it is too soon to see if it will improve the situation (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 56:20. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Most likely, without the EU Whistleblower Directive, it would not have been possible to strengthen whistleblower protection in Denmark (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 57:26. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

In Denmark, corporatism played a negative role in relation to whistleblower protection. Traditionally, trade unions were against reforms in the area of whistleblowing because they considered these kinds of cases as falling into their own area of competence and considered in a way whistleblowers as competitors. However, over the last two or three years, there has been a change in their attitude towards whistleblowers, which has become more positive (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 59:02. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

Denmark has four derogations or “opt-outs” from EU cooperation, which include the area of Justice and Home Affairs. So, for political reasons, cooperation with EU-level institutions like OLAF is difficult. Also, the cooperation with the newly established European Public Prosecutor's Office (EPPO) has not started yet even if EPPO asked Denmark to start the related procedure. This affects adversely international enforcement strategies to counter economic crime and it is an area where Denmark has to improve (Olsen, 2022).

Suggested citation: Olsen, Jesper (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 01:04:07. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

One of the vulnerabilities of the Danish system is represented by the lack of focus and cooperation on countering criminal activities that have a transnational nature. There is a tendency for the Danish enforcement agencies to avoid being involved in transnational investigations and anti-financial crime efforts (Egerod, 2022).

Suggested citation: Egerod, Benjamin Carl Krag (2022) VIRTEU National Workshop - Denmark, Session 2 [Online]. Video recording at 1:05:50. Available at: https://www.corporatecrime.co.uk/virteu-workshop-denmark.

VIRTEU NATIONAL WORKSHOP Denmark

VIRTEU
NATIONAL WORKSHOP
Denmark