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54 • Fifty Shades of Tax Dodging Special Purpose Entities (SPEs) Denmark has a certain type of shell company structure called ‘kommandit’ companies and it is possible to set up trusts. As part of the December tax haven package, a law was passed in April 2015 to ensure that the creator of a trust is taxed in a manner that makes it more difficult to use these structures to dodge taxes. 400 The government has also initiated investigations to outline the use of the kommandit structures in tax dodging. The full investigation is set to finish by the end of 2015. However, preliminary conclusions have already resulted in the government planning to set up a new register for the owners of kommandit companies, to avoid these companies being used by foreigners to dodge taxes. 401 Patent box Denmark does not have a patent box and has no plans to introduce one. 402 Tax treaties Denmark has 87 tax treaties with different countries around the world, of which 37 are with developing countries. 403 The negotiations of treaties are conducted by the Ministry of Taxation with no involvement of other ministries or external actors – including the Foreign Ministry. 404 The tax treaties with developing countries were, until the mid-1990s, largely based on the United Nations (UN) model, while subsequent treaties are primarily based on the Organisation for Economic Co-operation and Development (OECD) model. Asked if the Ministry would consider once again using the UN model as a starting point for negotiations with developing countries today, the answer is no. Officials state that they prefer to “present the same draft irrespective of the country we negotiate with.” 405 However, a small step forward in Denmark’s treaties came in 2015, with the adoption of the ‘super GAAR’ (see above). This means that all Danish treaties now include an anti-abuse clause, which was not the case before. 406 It is problematic that the Danish tax treaties are negotiated without the involvement of the Ministry of Foreign Affairs as it results in a lack of policy coherence. This became very clear in the autumn of 2014, when the government negotiated a tax treaty with Ghana. The treaty has been highly criticised by non-governmental organisations (NGOs) and left-wing parties for being unfavourable towards Ghana. It has a tax rate of only 5 per cent on transferred assets to Danish subsidiaries, which is lower than the 8 per cent stated in Ghanaian legislation. 407 The treaty stands in sharp contrast to the Danish development policy in Ghana, which has an explicit focus on strengthening the Ghanaian tax system and domestic resource mobilisation. 408 Thus there is lack of coherence between Danish tax policies and Danish development policies. This misalignment sill happens despite the Danish Government’s Policy Coherence for Development (PCD) plan, which is clearly not being implemented by the Ministry of Taxation. 409 A Parliamentary hearing was held in April 2015 on the effect of Danish tax treaties with developing countries. Responding to the critics of the Danish treaty with Ghana, the then Minister of Taxation sought to offer reassurance that the deal did not cheat Ghana of revenue, but at the same time he also stated that “Denmark does not give development assistance through tax treaties”, a statement that reaffirms the government’s position that tax treaties should not be crafted in a way that is more favourable to developing countries. 410 The tax focus in the Danish PCD plan is on strengthening and implementing fair tax systems, and creating synergies between the fight against tax fraud and the promotion of good governance within taxation. 411 Furthermore, the Ministry of Development and Trade in April presented a plan on ‘tax and development’, which added extra funds of €1.34 million to the Danish development work on tax. 412 The ministry focuses on advocacy and capacity building, with a special focus on civil society, regional and international organisations. 413 The total value of the current and new Danish tax and development agenda amounts to €75 million until 2019. 414 These are all welcomed initiatives, but it is worrying that they are happening without coordination with the Ministry of Taxation, which allows for the kind of inconsistencies that the treaty with Ghana demonstrates. A powerful tool to become aware and to better avoid these inconsistencies would be for Denmark to carry out a spillover analysis of its tax practices on developing countries and to ensure that, when Ministries’ objectives collide, then the objective that overrules is the one in favour of development. Unfortunately, the Tax Ministry has no plans to conduct a spill-over analysis, 415 nor to implement the PCD, which it considers to belong under the Ministry of Foreign Affairs. 416 Financial and corporate transparency Seemingly inspired by a British model, the previous government encouraged relevant stakeholders to establish a ‘Fair Tax mark’, a label that companies that live up to certain standards can put on their products to show consumers their commitment to fair and transparent taxation. 417 The government hopes that “…a fair tax-brand will bring the transparency all the way to the counter, all the way to consumers.” 418 It remains to be seen whether these plans will progress under the newly formed government.
Fifty Shades of Tax Dodging • 55 Public reporting for multinational corporations Denmark has implemented the EU provision for country by country reporting for the financial sector, and has made it mandatory for financial institutions to publish this information in their annual report. 419 The previous government declined to make their position on country by country reporting for other sectors clear, but have expressed objections about the inclusion of public country by country reporting in the Shareholders Rights Directive, according to one of Denmark’s business associations. 420 Rather unique in the EU, the Danish tax authorities have disclosed ‘open tax payments list’ since 2012, where the public can see what companies, associations and funds pay in corporation tax in Denmark. 421 In December 2014, it was decided to eventually expand the scope of these lists to include corporate tax payments made in the last five years. 422 In a highly troubling development, the largest party in the coalition (that supports the new government formed after June 2015) has stated that they no longer support these public lists. 423 As the party of the current government has previously been sceptical of the lists, 424 their future is uncertain. The prospects for a parliamentary majority in favour of public country by country reporting seems less favourable than for a long time. Ownership transparency Denmark took a major step forward on corporate transparency when it announced in late 2014 that it would create a public register of beneficial owners, being one of only a handful of European countries having committed to this important measure of transparency. 425 The move followed stories in the press showing that Denmark was being marketed in Russia and Eastern Europe as the ideal place to incorporate for tax purposes due to its secrecy around the kommandit companies (see above). Among the companies that decided to make use of this opaque company structure was an Uzbek oil company that had routed more than €1.3 billion through Denmark as well as a Ukrainian pharmaceutical company that allegedly used the structure to dodge €34 million in taxes. 426 The public register is expected to be implemented by late spring 2016. 427 Further transparency was secured when it was decided in 2015 that bearer shares should be phased out, and that a public register of shareholders was introduced as of the 15 June 2015. 428 EU solutions With the implementation of the Capital Requirements Directive IV, a strong support for the EU’s proposal for the automatic exchange of tax rulings, 429 and a plan to implement the Anti-Money Laundering Directive during the autumn of 2015, Denmark is one of the countries at the forefront of implementing EU policies on tax. Denmark has recently shown resolve to go beyond the minimum recommendations of EU regulation, going for a much more comprehensive General Anti Avoidance Rule (GAAR) than suggested by the Commission and signalling a will to make their register of beneficial owners publicly available. At the same time, Denmark rarely takes the lead when these issues are negotiated at the EU level. Furthermore, the change of government in June 2015 suggests that we may see a change in the way that Denmark implements EU regulation as the new coalition agreement states that the government will take a more conservative approach to the adoption of directives on corporate matters to limit ‘restrictive measures’ for the business environment, and also plan to give the corporate sector a bigger say on how Denmark adopts directives related to corporate matters in future. 430 If this corporate advice is taken from multinational corporations rather than small- and medium-sized enterprises, it could mean that Denmark will become less progressive in the future. In terms of the introduction of a Common Consolidated Corporate Tax Base (CCCTB) at EU level, Denmark supports the idea in principle, but stresses that any agreement should not dilute the tax base, and it has not been a topic that Denmark has pushed at the EU level. 431
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