Taxgate takes another turn after revelation that Skat changed rules

Tax authority dropped a key requirement while auditing the PM and her husband – a change which spared him from having to pay Danish taxes

The strange, twisted tale of Taxgate took another turn today when Berlingske newspaper reported that tax authority Skat made a change to its practises while it was investigating PM Helle Thorning-Schmidt and her husband Stephen Kinnock’s personal tax information.

Without telling anyone, Skat decided to drop a long-existing rule on tax obligations that required that people in situations similar to that of Kinnock, a British national who worked in Switzerland at the time of Skat’s audit, had to have resided outside of Denmark on a temporary basis for a maximum of two to three years in order to avoid paying Danish taxes.

If the change had not been made, Berlingske reported, Kinnock would have been found to owe Danish taxes. Instead, the PM’s husband was ultimately cleared of any Danish tax obligations in the audit.

Representatives from Skat told Berlingske that the change was made not to benefit Kinnock, who had been outside of Denmark for at least six years while his wife continued to reside in Copenhagen, but because the interpretation of the law was incorrect.

According to notes connected to the audit obtained by Berlingske, a meeting was held on 30 August 2010, right in the middle of the investigation into Kinnock’s tax obligations. At the meeting, representatives from Skat’s Copenhagen office and the Tax Ministry agreed to drop the requirement based on what the notes referred to as “a misunderstanding”. The notes offered no further reasoning for the change.

And that, according to several tax experts who spoke with Berlingske, seems a bit suspicious.

“Skat removes a key point on how long one can reside out of the country – not just a modification, but a clear change of practise – without telling taxpayers about the change,” Thomas Rønfeldt, a tax law professor at the Aalborg University, said. “This does not seem like the right way to go about it.”

The former president of the national tax board Skatterådet, Lida Hulgaard, also questioned Skat’s actions, saying that it was undeniable that Kinnock would have had to have paid Danish taxes if not for the change. She said that at the very least, Skat should have written the change into the audit, which it did not.

But top Skat official Carsten Vesterø wrote off the notion that Skat attempted to help Kinnock’s cause as a “conspiracy theory”. He did, however, admit that it seemed odd that this change was made while the PM’s husband’s audit was occurring. 

The PM refused to comment on the new information, but opposition party Dansk Folkeparti released a statement calling Berlingske’s revelations “very strange”. The party has called on the newly-appointed tax minister, Holger K Nielsen (Socialistisk Folkeparti), to look back into the entire circumstances surrounding the audit. 

The leak of the confidential audit into Thorning-Schmidt and Kinnock’s finances shortly before last year’s election set off a widespread political scandal. A commission is currently investigating the leak, which was allegedly carried out by Peter Arnfeldt, the former spin doctor to the former tax minister, Troels Lund Poulsen (Venstre). Arnfeldt has formally been charged by police for the leak and Poulsen was forced to take a leave of absence from parliament. The scandal also cost former top Tax Ministry official Peter Loft his job, and even led the PM to make the rather unorthodox decision to get out ahead of rumours that her husband is gay

The Taxgate commission will hold its next meeting on Tuesday. It will call witnesses off and on through March 2013. Various journalists, Skat employees and high-ranking government officials, including Poulsen and former PM Lars Løkke Rasmussen (Venstre), are scheduled to appear.

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