(Bloomberg) The two biggest political parties in Denmark’s parliament say the country may need to tighten punishments for bankers on the wrong side of the law as the Panama leaks continue to reveal practices that politicians say are unacceptable.
The opposition Social Democrats, the largest party in Denmark’s legislature, and the Danish People’s Party, the biggest group in the ruling bloc of Prime Minister Lars Loekke Rasmussen, say the current framework may be too weak to discipline an industry whose misdeeds have dominated headlines in recent months and even years.
Such “revelations make us even more convinced that we need to look into raising the punishment for banks and other advisers counseling clients on evading tax payments and moving money offshore to avoid taxation,” Benny Engelbrecht, the head of parliament’s finance committee and a leading Social Democrat lawmaker, told Bloomberg.
Nordea Allegations
The comments follow media reports over the weekend alleging that employees at the Russian unit of Nordea Bank AB, Scandinavia’s largest lender, created offshore shell companies which can be used for evading taxes. The allegations follow earlier reports that Nordea had worked with Panama-based law firm Mossack Fonseca to help wealthy clients hide their assets from tax authorities. Nordea declined to comment on individual clients but said shell companies aren’t necessarily illegal constructions.
“As we’ve mentioned earlier, we naturally include all new and relevant information that we’re made aware of in our internal investigation,” Nordea said in a comment on its website. “Should it emerge that Nordea hasn’t complied with the rules, that would of course be unacceptable and would be reported to the relevant authorities.”
Denmark is already preparing stricter rules to prevent tax evasion. The country’s highest administrative body overseeing tax laws has ruled that the ministry can force banks to hand over lists of clients with links to both Denmark and what it defines as tax havens, including places such as Liechtenstein, Singapore or Panama, according to a statement on Tuesday.
The Danish People’s Party welcomes having “tougher penalties” put on the agenda, according to its finance spokesman Hans Kristian Skibby. Such a move would make “good sense,” he said.
In Denmark, where residents carry one of the world’s highest tax burdens measured in revenue as a percentage of gross domestic product, politicians have taken particular offense at the notion that some individuals have sought to circumvent its laws. Should it emerge that the government has lost revenue that can no longer be recovered as a consequence of tax evasion, demanding compensation from the responsible banks may be the next best thing, Engelbrecht said.
Mandatory Insurance
“We’re also contemplating making it mandatory for banks to be insured against fines and losses from being convicted in aiding tax evasion,” he said. “Insurance companies have proven themselves a very effective force for policing inappropriate behavior in other areas as they aim to avoid losses and would likely be a more effective supervisor than authorities can be.”
Denmark’s penal code currently makes it possible to put tax evaders in prison for as long as 18 months. In extreme and deliberate cases, people can face as much as eight years behind bars.
Advising clients to hide their wealth is a “serious business,” Skibby said. “There’s a lot of money at stake.”
