Britta Nielsen
Britta Nielsen Image Credit: Reuters

Denmark: After years of financial hardship, she craved a life of luxury. Her remedy was to embezzle $17 million (Dh62 million) from the Danish state.

Britta Nielsen, a 65-year-old former social worker, has stunned a country that's used to topping anti-corruption rankings. Through 25 years of accounting fraud right under the noses of her bosses, she managed to channel funds meant for Denmark's weakest citizens over to a private account. She then transformed herself into a member of a jet-set elite with access to every extravagance. She bought expensive horses for her daughter and multiple lavish properties, including a ranch in South Africa. It was there that Nielsen was finally caught.

Danes now want to know how their welfare pot was so easily pilfered before anyone even noticed something was amiss.

Not the only one

But Nielsen wasn't a one-off. Like Germany, Denmark is trying to get back billions of dollars it says were stolen by offshore financiers as part of an elaborate tax-refund scheme known as Cum-ex.

In fact, Denmark has been hit by a wave of tax fraud, from brazen acts like Nielsen's, right down to the widespread practice of paying tradespeople and cleaners under the table. Such activities resulted in an estimated $14.5 billion tax loss as of 2017, according to PwC. That's equivalent to about 4 per cent of Danish GDP, and doesn't include the roughly $2 billion Cum-ex loss.

4%

of Danish GDP was lost as of 2017 to tax fraud.

The danger now is that taxpayers start to wonder why they should pay toward a system so riddled with dysfunction.

"The precondition for a society like ours is trust," Jeppe Bruus, legal affairs speaker for Denmark's ruling Social Democrats, said in an interview. Cases like Nielsen's "risk damaging that trust,” and then "people start to question why they should contribute."

All for welfare...until now

Unlike Americans, Danes have traditionally been enthusiastic taxpayers. The Social Democrats won last year's election promising tax hikes to pay for more welfare. They ejected a center-right coalition that had promised tax cuts. For voters, it's almost a sacred pact: pay to the state in exchange for free health care, education and subsidized public transport.

That's why Nielsen's case has enraged Danes, and Bruus says an increase in such examples of fraud is "one of the reasons why we're spending more on police” and other forms of law enforcement.

Toothless system?

Nielsen, who once struggled to pay her bills, got a six-and-a-half-year prison sentence. It's one of the harshest Denmark has ever handed out for financial crimes, but in practice she may walk free three years from now. Stein Bagger, a bodybuilding IT fraudster, got seven years in 2009 for a $125 million heist in which he defrauded his investors.

Danes seem to think their criminal justice system is a bit toothless, and have turned to social media to vent. Entrepreneur Martin Thorborg joked that with a sentence like Nielsen's, he might consider stealing money "in his next life,” instead of working hard and paying taxes for over 30 years.

Bruus says the Nielsen case has forced Danes to reflect on who they are, and whether they can preserve a social model held up by the likes of Bernie Sanders and Paul Krugman as one for the US to emulate.

For now, Denmark's Auditor General has started an investigation into the workings of the country's tax agency, in an effort to figure out what went wrong.