Contrary to popular belief, tax revenues from tax and VAT evasion are relatively modest. For example, they make up only a fraction of the Treasury’s income from speeding tickets. Few companies are fined.
In most cases, tax evasion is penalised by a fine, the size of which depends on the amount of taxes evaded and the nature of the income. Read more about fines in the July 2019 issue of tax:watch.
The Tax Administration’s so-called transparency report for 2017 shows that this year, the administration issued 1,511 fines to citizens and businesses, while the courts imposed fines in 215 cases for violating the tax law.
The total of 1,726 fines included not only fines for the avoidance of income tax, but also fines for VAT evasion and for violating the rules on withholding taxes etc.
The fines, according to information from the Tax Administration, provided a total income to the Treasury of DKK 61.84 million. Thus, the average tax fine in 2017 amounted to DKK 35,829.
The vast majority of the fines were given to employees and self-employed individuals.
Less than 10 pct. of the total amount of fines can be attributed to companies etc.
Given the media's repeated writing about the extent of undeclared income and the use of tax havens etc., many will probably be surprised at the relatively modest number of fines that are issued in the tax area.
The total income from fines in 2017 amounted to less than 10 pct. of the police revenues from automatic traffic control, which yielded DKK 871 million in the same year.
There is no doubt that the politically agreed addition of further resources to the Tax Administration will lead to more scrutiny and thus also more fines, but the vast majority of tax and VAT cases end without fines.
Thus, doubling the number of employees of the Tax Administration would not result in a corresponding increase in the number of fines.
The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.