Danish Banks Warned Against Passing Tax to Clients Amid Scandals

(Bloomberg) --

Denmark is warning the country’s banks to “think twice” before passing through to customers a new tax the industry is facing.

The Social Democrat government plans to draw on the finance industry to fund a campaign pledge to expand an early retirement program. The details have yet to be settled, but lenders already are pushing back. Labor Minister Peter Hummelgaard Thomsen said in an interview this should instead be a “time for this sector to reflect” on its checkered past.

“I think there is a broad public understanding and support behind the proposal,” Hummelgaard Thomsen said, citing the financial crisis and more recently the $220 billion money laundering scandal at Danske Bank, the country’s largest lender.

The retirement proposal was a key part of the Social Democrats’ victory in June. The new government expects the new banking tax to generate around $1.5 billion kroner ($220 million).

“Many people lost their jobs and unemployment benefits because of the greed in the financial sector,” Hummelgaard Thomsen said by phone. “In the meantime, banks have continued down the same path with money laundering, aggressive tax schemes and dividend fraud.”

Hummelgaard Thomsen has previously suggested targeting the top bankers’ pay packages to generate new revenue for the government. Specifically, he’s proposed that banks don’t get tax deductions for executive compensation that exceeds 10 million kroner.

The minister declined to comment on whether a cap on tax deductions will be included in the new tax package, saying it’s “too early” to go into specifics.

Banks are coming under increasing pressure to contribute more to government coffers. In Sweden, the government has announced a new tax to help fund military operations. Finance Minister Magdalena Andersson said in a Facebook post the industry’s profitability makes for “plenty of room for the banks to contribute more to the public good.”

To contact the reporter on this story: Morten Buttler in Copenhagen at mbuttler@bloomberg.net

To contact the editors responsible for this story: Christian Wienberg at cwienberg@bloomberg.net, Frances Schwartzkopff, Nick Rigillo

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