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52 • Fifty Shades of Tax Dodging Trusts – one of the most opaque instruments that allows beneficial owners to be hidden – were introduced only recently in the Czech Republic, in 2014. 368 During the last year, the General Financial Directorate specified the level of information that trusts need to report regarding taxation. 369 However, officials from the Ministry of Finance and Financial Directorate admit in informal discussions that the current form of trusts create very opaque structures. 370 The Ministry of Justice has indicated that trusts should be registered in the register of trusts once it is established (currently no registration is required). However, the new proposal has not yet been discussed by the government. 371 EU solutions According to the recently published Strategy of the Czech Republic in the EU, the Czech government “considers the existence of tax havens within the EU a political problem, a manifestation of improper behaviour and unfair competition…” and “will seek the maximal information access and overall global restrictions of tax havens”. The Czech Minister of Finance likes to say that “after many years Czech Republic is again the leader of tax agenda in Brussels.” 373 However, the Czech Republic was reportedly among the opponents of the attempt to introduce a Common Consolidated Corporate Tax Base (CCCTB) in the EU when the proposal was first put forward in 2011. 374 The current position of the Czech government is not known. Global solutions The Ministry of Foreign Affairs conducted a very open consultation process in February 2015, which included representatives of development NGOs regarding the Czech Republic’s framework position to the post-2015 development agenda. The final document was approved by the government and provided the basis for the Czech Republic’s position on the Financing for Development process as well as the Sustainable Development Goals negotiation of the outcome documents. According to unofficial information, it is mainly the Ministry of Finance that insists on keeping the agenda of global tax rules and standards purely within the OECD. The Ministry of Foreign Affairs is more open to the idea of taking this agenda to the global level, which was documented by the official statement at the third Financing for Development (FfD) conference in Addis Ababa this year. 377 However, it is the Ministry of Finance that outlines the position of the Czech Republic. How much attention the Ministry of Finance pays to this agenda is illustrated by the fact that it did not send a single representative to the FfD conference in July. Although the Ministry of Finance supports the adoption of Automatic Exchange of Financial Account Information with “as many jurisdiction[s] as possible,” 378 no explicit reference to the inclusion of developing countries is made. It should be highlighted that the department of the Ministry of Finance responsible for development cooperation never responded to the questionnaire sent to them as part of the research for this chapter. The MFA’s Development Cooperation and Humanitarian Aid Department did not feel it was suitable for them to respond. In the MFA’s case, there is a need to increase capacity if more attention is to be given to the policy coherence agenda (not only in relation to tax). On the other hand, the main problem at the Ministry of Finance is lack of political will and awareness of the developmental dimension of tax agenda. Conclusion The Czech Republic does not block progressive initiatives on tax transparency, but on the other hand it is definitely not a leader in this agenda. Although the fight against tax evasion is one of the priorities of the government, there is still very little focus given to corporate tax avoidance. The Czech Republic prefers the OECD instead of the UN as the arena for negotiating global tax rules and standards. The acknowledgement and understanding of the developmental impacts of tax policies remains very weak, which is mostly due to a lack of capacity at the Ministry of Foreign Affairs on the one hand and a lack of interest from the Ministry of Finance on the other. In the Framework Position, the Czech government “welcome[s] the reform of the global tax rules and standards which significantly affect the ability of governments to collect taxes, and which should stop purposeful profit shifting to countries with more favourable taxation.” 375 Although the Czech Republic is in favour of developing countries’ involvement in the tax negotiations, unfortunately it does not “support up-grading the current mandate of the UN Committee of Tax Experts” to an intergovernmental tax body. 376
Fifty Shades of Tax Dodging • 53 Denmark “There has been a tendency towards a pronounced mistrust of businesses and way too much focus on their tax dodging. I promise to change that rhetoric.” Karsten Lauritzen, newly appointed Minister of Taxation, September 2015 379 General overview Over the past year, tax dodging has been a topic of heated debate in Denmark. In particular, the leaks from Switzerland and Luxembourg caused outrage and calls for political action. 380 The pressure for a political response became particularly urgent when a Danish newspaper revealed that the national tax authorities had ignored the now infamous HSBC list for more than five years, 381 despite the fact it contained more than 300 secret bank accounts held by Danish citizens in Switzerland. 382 As a response, a so-called “Tax Haven package” was adopted in December 2014 by the government and all political parties except the relatively small right-wing party Liberal Alliance. 383 The agreement included commitments to improving corporate transparency and tightening fiscal loopholes. 384 A second package, which included further measures to stop tax dodging, was passed in April 2015, albeit this time with a smaller majority. 385 Thus, the past year has been important in fighting tax dodging in Denmark, with increased public awareness of the issue, and new fiscal regulation and agreements to tackle the problems across a wide political spectrum. Discussions about Denmark’s role in supporting developing countries’ revenue mobilisation have been less prominent, but have nonetheless been taking place. One example was a Parliamentary hearing on Danish tax treaties with developing countries in April 2015. 386 Elections in June brought in a new government and, although there has been no announcement about any official changes in the government’s position on the fight against tax dodging, visible cracks are already emerging in the governing coalition’s support for corporate transparency. 387 It is unclear whether certain provisions in the second tax haven package will be rolled back as the now governing party abstained from voting for them before the elections. 388 Tax policies The increased awareness and focus on tax policies has resulted in a number of new tax laws and initiatives to combat tax dodging. Among these initiatives has been the introduction of a ‘super’ General Anti-Abuse Rule (GAAR), which came into force on 1 May 2015. 389 The Danish ‘super GAAR’ is noteworthy by going further than current EU recommendations for anti-avoidance rules, which only cover the Parent-Subsidiary Directive. On the other hand, the Danish rules also cover the Interest & Royalties Directive and the Merger Directive, as well as all of Denmark’s tax treaties. This means that none of the tax benefits contained in these directives or treaties can be acquired if one of the main purposes of any arrangement or transaction was to reap these benefits. 390 Tax rulings Denmark does grant tax rulings, including Advance Pricing Agreements (APAs). 391 According to the European Commission, Denmark had 12 APAs in force at the end of 2013, of which ten were with non-EU member states. 392 Denmark has in recent years increased the focus on transfer pricing, 393 and has changed the APA procedures as of 1 July 2015, stating that a ruling can be disregarded if the value of an asset transferred subsequently deviates significantly from the value approved in a ruling. 394 The previous Minister of Taxation justified this change with reference to the difficulties of pricing intellectual property correctly. 395 The change follows several high-profile transfer pricing cases including for Danish household names such as Pandora 396 and Novo Nordisk. 397 According to the tax authorities, they had 76 cases of re-evaluation of transfer price amounting to €2.72 billion in 2014 alone. 398 The current ruling party did not support the changes to the APA procedure, 399 but since assuming power in June 2015 they have not indicated any plans to roll back the changes.
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