TAX TRUST (2)

Denmark's tax minister Holger K. Nielsen has accepted that the Tax Ministry's method of valuing property is a mess and should be scrapped. However, his proposal for dealing with it looks likely to turn into an even bigger mess.

He has decided to retain the 2011 valuations until 2015. During that time, an expert committee will work out what a new system should look like, Parliament will approve it, and the necessary IT-systems for it will be installed and tested. When the new valuations go out in March 2016, if there is a discrepancy between the value in 2016 and that in 2011 (suitably indexed), then the taxpayer will automatically get a rebate for the overpayments in the past.

You don't have to be a tax expert to see why this could end up as a political disaster. State auditors have already said that up to three out of four valuations are wrong, so freezing the system for two more years simply freezes those wrong valuations. Which in turn means that irate taxpayers will remain irate for at least two more years, a period which covers both local elections in a couple of months' time and a general election within 2 years.

Sensible voices from all parties have suggested that the Government err on the side of caution, return money now, and then if necessary claw money back in 2016 if it turns out that taxpayers have received too much. For reasons which I do not understand, Mr. Nielsen has chosen to do the exact opposite. My guess is that the Government will pay a high price for this folly.

Walter Blotscher