By: AmCham Denmark (May 07, 2010)

The following opinion editorial was published in Børsen's May 7, 2010 edition. To read the Danish version, click here.

Foreign Companies, Who Needs Them? Denmark!
By Stephen Brugger, Executive Director, AmCham Denmark

We at AmCham were dismayed to read the comments by the Danish Tax Authorities and Tax Minister implying that foreign companies were guilty of using transfer pricing to illegally reduce their tax payments in Denmark.  The authorities must be fully aware that such comments would almost certainly lead to media headlines branding all foreign companies guilty of tax evasion and, therefore, a bad thing for Denmark.   

Foreign companies operating in Denmark are vital to the Danish economy and welfare system. This isn’t just AmCham’s opinion but is supported by statistics coming out of the Ministry for Business and Economic Affairs. Here’s a quick overview: though comprising only 1% of private sector companies, foreign companies employ 19% of the private sector workforce and are responsible for 24% of all private sector turnover. Furthermore, foreign companies make up 27% of exports – a key factor in the strength of the Danish economy.

Foreign companies, despite their limited presence, are positive for Denmark. However, in spite of these significant statistics, foreign companies are often the subject of unsubstantiated allegations and exploitation.

AmCham Denmark strongly believes that companies, both foreign and Danish, must follow Danish and international rules when it comes to taxation and general business conduct. This includes ensuring that internal transfer prices are done on an arm’s length basis. It is also AmCham’s firm belief that the overwhelming majority of companies do just that. So why is it that foreign companies are frequently subject to scrutiny by the tax authorities? There is an increasingly exposed assumption that foreign companies are guilty until proven innocent. We believe this has fueled the debate currently taking place in the media and does not reflect well on Denmark’s views on foreign companies operating here.

Given the current focus on Denmark’s need for growth and the important role foreign companies play in the Danish economy, it is worrying that the message being espoused by the government is “if foreign companies are going to operate in Denmark they better be prepared to be inspected.” To single out foreign companies on an issue that is equally applicable to Danish companies is unfair and does nothing to encourage foreign companies to establish – or stay – in Denmark.

Based on the facts, there is a clear need to continue efforts to attract and retain foreign companies. This was supported at the most recent meeting of the Vækst Forum which focused on ways to increase foreign direct investment in Denmark. The message “we want foreign companies” is, however, often overshadowed by the message “foreign companies are criminals.”

This mixed message needs to be addressed at the highest level. The tax authorities should investigate companies, foreign as well as Danish, suspected of wrongdoing based on evidence, and refrain from making blanket generalizations. For the benefit of Denmark as a destination for future foreign direct investment we encourage politicians and media to ensure the debate remains balanced and fair.

In late 2009 AmCham Denmark survey results showed that half of foreign companies have, or are, considering reducing investments in Denmark. Let’s avoid giving them too many incentives to do so.