Reform of tax administration
The Ministry of Taxation is committed to reforming the tax administration with the goal of increasing trust and establishing clear accountability. Resources will be allocated to strengthening the capacity of the tax administration, including recruitment of additional staff.
The commitment does not detail how the tax administration should be reformed or clarify which initiatives will be implemented to increase trust and accountability. However, the commitment still refers to improvements to be obtained through strengthening the capacity of tax administration through the concrete action of allocating additional resources.
Increased trust and improved accountability can be measured through expert assessments and public opinion surveys of employees in the Danish Ministry of Taxation. Furthermore, by looking at the annual budget, it is possible to measure whether more resources have been devoted to the ministry in general and more specifically to the hiring of additional staff.
With a political agreement concluded in November 2017, the tax administration was strengthened with an additional DKK100 million (around US$16 million) in annual funding for the period 2018-2021 to increase tax compliance among small businesses. In addition, the current government has proposed funding 1,000 additional employees to strengthen the tax administration’s efforts to increase tax compliance for all taxpayers as part of a comprehensive reform of the tax administration’s compliance efforts. One of the many goals of the reform is to increase trust in the tax administration as well as ensuring that more people pay the correct amount of taxes. With a subsequent political agreement concluded in April 2020, it was further decided that the first 250 employees should strengthen areas of: i) money laundering and criminal cases; ii) international tax evasion and aggressive tax planning; and iii) VAT compliance. Besides the funding directly linked to the goal of increasing compliance, the Ministry of Taxation has also secured funding for a general strengthening of the tax administration. This will help secure a base of funding for the general administration of the tax system in the coming years and create the foundation for development of, for example, improved IT systems. In total, the Ministry of Taxation will have a budget of DKK10.5 billion (around US$1.76 billion) in 2021 compared to DKK8 billion (around US$1.27 billion) in 2018.
Challenges to effective commitment implementation
While the number of additional staff hired can be assessed using administrative data, no target staff number has been set, making it challenging to assess whether the increase in resources has been sufficient to achieve the desired results.
Transparency International Denmark recommends a follow-up analysis to assess the effect of the ministry’s extra resources and personnel. It would be useful to know how these measures improve the ministry’s efficiency in the context of anti-money laundering and criminal cases. For example, has the ministry detected more cases and has the number of disclosures increased?