The Government has passed a law aimed at streamlining the municipal tax assessment process and significantly reducing the number of municipal tax appeal boards. The rules are outlined in Sections 1, 1A, 1B, and 1C of the Tax Administration Act.
The law includes three main points:
- Expanded access to municipal cooperation in the area of tax assessment.
- Establishment of a tax assessment center for the Øresund region.
- The state will take over responsibility for the secretarial services of the tax appeal boards.
Tax Assessment Cooperation
The law allows for increased cooperation between municipal tax assessment authorities.
- Firstly, municipalities will be able to appoint a joint responsible authority for tax assessment without requiring the approval of the Minister of Taxation.
- Secondly, municipalities will have the opportunity to establish joint tax assessment centers, which will function as independent administrative units.
Øresund Tax Assessment Center
The law allows for the establishment of a tax assessment center for cross-border commuters, i.e., individuals living in Denmark who earn income from Sweden or vice versa—so-called cross-border commuters. Furthermore, the law provides the possibility to establish similar tax assessment centers in other border regions, with a particular focus on the border area in Southern Jutland.
Fewer Tax Appeal Boards
There are currently 228 tax appeal boards, which are intended to be reduced to around 50 through inter-municipal cooperation. The government believes that a tax appeal board should serve approximately 100,000 residents or handle an average of 200 cases annually. This goal will be achieved by allowing municipalities to establish joint tax appeal boards.
Finally, the state will take over responsibility for the secretarial services of the tax appeal boards. However, after negotiation, this responsibility can be delegated back to the municipalities for a fee, as has been done with corporate tax assessment. Secretarial services may also be transferred to municipal associations created by the municipalities.
It is the secretariats that prepare the case summaries, which form the basis for the tax appeal boards' decisions.
Tax Appeal Boards as the Future Appeal Body for Companies
It is proposed that, with the authorization of the Minister of Taxation, the tax appeal boards will serve as the first instance for company tax complaints. Under current rules, the National Tax Tribunal is the first instance for appeals concerning corporate tax assessments. However, this will only happen once the number of tax appeal boards has been sufficiently reduced.
Entry into Force
The law comes into effect on September 1, 2003, and onwards. An agreement for municipalities to take over the secretarial services of the tax appeal boards must be reached with the Customs and Tax Administration no later than August 1, 2003.
Our Opinion
It is our view that the establishment of larger municipal tax assessment centers will enhance the professional competence of municipal tax administrations. Additionally, it is a positive development that companies and majority shareholders will now have their appeals handled by the same appeal body, rather than, as is currently the case, by both the National Tax Tribunal and the tax appeal boards.