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Denmark: Controversial Bill to Give Tax Authorities Full Access to Electronically Stored Company Data

(Nov. 16, 2010) The Danish Ministry of Taxation (Skatteministeriet, or SKAT) has proposed an amendment to the Danish Tax Control Act (869/04) under which the authorities would be permitted to have “full access to all company data stored on electronic media.” (Marcus Hoy, Concern Raised over Danish Bill to Allow Authorities to Copy Business Electronic Data, PRIVACY LAW WATCH (Nov. 3, 2010),
; Lov om ændring af skattekontrolloven, Skatteministeriet J. nr. 2010-711-0044 (Sept. 1, 2010),
.) The proposal, published on September 2, 2010, would be applicable to all businesses liable for payment of assessed taxes and would put to an end the current rules that require SKAT to obtain a court order before gaining access to such data. The courts grant the orders only after SKAT demonstrates a “justifiable suspicion that the company in question has committed an offense.” Thus, under the proposal, copying of electronic data would instead become “a routine occurrence during audits and inspections.” (Hoy, supra.)

The proposed bill states that the law needs to be updated “to keep pace with the 'rapid development' in the area of electronic storage, which has seen many companies switch to electronic rather than paper storage of accounts” and to prevent companies from being compelled to “bear the administrative burden of having to print the required information on paper.” It states that “any information deemed irrelevant for tax purposes would be destroyed” and that “strict privacy guidelines would be established.” (Id.)

A tax expert at the international financial services firm Deloitte Touche Tohmatsu termed the draft legislation of “great concern for businesses,” because it might make it possible for the authorities to look at all business data (including, e.g., research data), not just the data relevant for tax control purposes. Moreover, in an October 20, 2010, statement entitled “SKATs BigBrother Proposal Scares Investors,” Deloitte Copenhagen contended that the level of access to private data accorded to the authorities under the law was “much greater than that of other European nations” and that the accompanying data security requirements might not be a very effective use of resources, given the amount of investment in such resources that would be necessary. (Id.)

Other organizations have voiced opposition to the draft amendment. They include the Confederation of Danish Industry (Dansk Industri), the Association of Danish Law Firms (Danske Advokater), and even the country's Data Protection Authority (Datatilsynet). Although the proposal is reportedly currently in the hearing stage and was to be included among a set of bills slated for approval in November 2010, criticism of the bill has made it unlikely that it will be presented for passage in its current format. (Id.)