Denmark’s tax agency has started pursuing legal claims in the U.S. over a tax-refund scam that it says wrongly forced it to pay out more than 12.7 billion kroner ($2 billion) to agents representing 277 pension plans in the U.S., and others in the U.K., Canada, Malaysia and Luxembourg.
The agency has filed more than three dozen lawsuits against pension funds in U.S. federal courts this month — including four on Friday — seeking to recover the payments, claiming more than 300 entities had pretended to own shares in Danish companies and submitted claims for refunds of dividend taxes. Danish companies are required to withhold a 27 percent tax on dividends, a levy that’s refundable to non-Danish shareholders, according to the agency’s filings.
The Danish tax authority said in August 2015 it had discovered it had paid dividend tax refunds to foreigners on shares they never held. The scheme is under investigation in Denmark, where at least three individuals have been charged, as well as in the U.K., Germany and other jurisdictions, according to the agency’s court filings.
Prime Minister Lars Lokke Rasmussen said last year that Denmark needs to find out what went wrong if the government is to maintain confidence in the revenue generation that is the backbone of one of the world’s most coveted welfare systems. Years of mismanagement and fraud cost the tax department about 100 billion kroner.
Danish prosecutors said in September when announcing criminal charges against two people that they’re continuing the investigation and hope to bring more charges against individuals and companies involved. At that point, they had recovered about 2.7 billion kroner.
The Customs and Tax Administration of the Kingdom of Denmark, also known as SKAT, said it received fraudulent refund requests from several agents on behalf of the U.S. pension plans between 2012 and 2015, according to the complaints.