(Bloomberg) -- Denmark is trying to find out just how many banks were involved in suspicious stock trades executed for the sole purpose of getting a tax rebate.
The transactions in question started more than a decade ago, after Denmark and Switzerland made it possible to claim back taxes on dividends through a revised double-taxation accord between the two countries.
Nordea Bank has already been implicated in the trades, and Denmark’s parliament recently discussed whether to take measures against the lender. The bank has said it operated within the letter of the law, but that it wouldn’t conduct such transactions today. It’s also made clear it’s cooperating with the authorities.
Denmark “will of course look into this,” Business Minister Rasmus Jarlov told Bloomberg.
“The crucial point is to find out whether people operated within standard rules for double taxation treaties or whether there’s a clear case of trying to get dividend taxes refunded, even if such taxes were never even paid in the first place,” Jarlov said. “There’s a very big difference between those two situations.”
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The comments follow a high-profile resignation in Danish financial circles related to questionable dividend tax claims. Christian Hyldahl stepped down last month as chief executive of ATP, Denmark’s biggest pension fund, after it emerged that a unit he oversaw 10 years earlier at Nordea had conducted such transactions. Hyldahl says the trades were legal, but that it was “wrong” to do them all the same.
Nordea used a fund created by Nykredit, a Danish mortgage lender, to help it execute the trades. Denmark now wants to find out how many other banks might have been involved.
The Swiss-Danish dividend tax case is the latest in a string of scandals to surface in Denmark’s financial industry. Danske Bank A/S is still waiting to learn how much it may have to pay in fines as the U.S. Justice Department investigates its alleged involvement in money laundering. And another probe is under way to track billions of dollars stolen from Danish state coffers in a separate case of dividend tax fraud.
Jarlov said that, at their worst, such dealings were “outright theft from taxpayers.”
The spate of white-collar crime in Denmark has shifted the political debate in a country that had regarded itself as low on corruption and high on ethical conduct. This year, anti-money laundering laws were significantly tightened, including increasing fines by 700 percent and raising the specter of prison sentences for executives.
Jarlov said the industry has to demonstrate that it “takes its responsibility to society seriously.”
That means that “financial firms need to think not only about the letter of the law, but also about the spirit of the law,” he said.
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