Tax agency targeting multinationals

Economists say companies underpay taxes by 14 billion kroner

Multinational companies with billion kroner sales in Denmark but which have not paid taxes here for a number of years are the target of a new investigation by the Tax Ministry.

The ministry seeks to determine whether multinational companies use internal measures to shift profits from Denmark to countries with lower tax rates.

The plan also calls for stepping up the accounting requirements for companies not paying any taxes, requiring greater transparency into company financial reports and allowing national tax agency Skat to hire outside assistance from accountancy firms.

According to the Tax Ministry, 29 percent of the nearly 3,000 multinational companies operating in Denmark did not pay taxes in the period 2006-2008. Others, say the ministry, have a longer history of avoiding taxes.

In 2008, multinationals paid 23.7 billion kroner in tax. But the independent Economic Council, an advisory board to the government and the central bank, has calculated that the state loses 14 billion kroner in taxes each year due to companies transferring their profits abroad.

The Confederation of Danish Industry warned that the ministry’s plan could result in multinational companies locating elsewhere.

DI also points out that accountancy firms may face a conflict of interest, since many of them also advise the multinational companies facing investigation.