Taxation on Trial

An artful dodger gets clipped

'If you've got a toothache, see a dentist; if it's a pain in your taxes, come to me." With that crude but compelling slogan, Mogens Glistrup, Denmark's premier tax-dodge artist and maverick politician, not only made himself a millionaire but also built the country's second largest party, which now holds 26 of the 179 seats in parliament. Last week, after a 3 1/2-year trial, a Copenhagen court found him guilty on a host of charges involving fraud and tax evasion and directed him to pay $880,000 in fines and back taxes. Glistrup's chief crime: swindling the state out of more than $1 million by exploiting tax loopholes in a scheme so labyrinthine that it took a team of investigators nearly three years to unravel it.

Tax Attorney Glistrup had attracted scores of wealthy clients through his enterprising use of the deductions allowed by Danish law on debt interest. Essentially, he set up a string of 2,716 dummy firms for his clients--bearing such mock names as the Lyngby Umbrella Rental Co. and the RXPQY-240 Co. These paper enterprises could then absorb the paper debts of Glistrup's clientele and pay income taxes at half the rate charged to private persons. Glistrup split the savings with his clients, who were able to enter less punishing tax brackets. In some cases, they managed to avoid paying taxes altogether, just like Glistrup.

Another complicated aspect of the dodge involved a relay system of accounting by which one company fed another its paper assets before the end of its fiscal year. This enabled each of the shells to meet the country's minimum conditions to be treated as a firm and thus qualify for the favorable tax rates.

Though he clearly was courting trouble, Glistrup turned his scorn for the tax laws that he used so well into a national crusade. Appearing on a TV talk show, he compared tax cheats with the guerrillas in the Danish underground who blew up Nazi-controlled railway lines during World War II. "Tax dodgers today are comparable to railroad saboteurs; they are doing a dangerous but useful job for the nation." Public response was so enthusiastic that Glistrup founded his

Progress Party in 1972. Its platform includes the dissolution of the Danish armed forces, the sale of Greenland to the U.S., biweekly elections, replacement of the country's cradle-to-grave welfare system with vending machines dispensing porridge--and, of course, abolition of taxation.

Glistrup concedes that his political road show is theater of the absurd, noting, "It beats lonesco completely." Still, he touched a raw nerve in the Danes' severely aching economy. Already hurting from 10% inflation, Danes are afflicted with one of the world's highest individual income tax rates. On a graduated scale the tax bite ranges from a minimum of 44% on incomes up to $11,600 to a maximum of 63% on earnings over $21,000. To make matters worse, the government imposed a $1 billion sales tax increase last fall to help balance a $2.6 billion trade deficit and meet the welfare costs of 12% unemployment.

With that increase to egg him on, Glistrup kept up his antitax campaign, though he was scarcely, as he claimed to be, the most celebrated Dane since Hans Christian Andersen and Soren Kierkegaard. Before the court verdict was pronounced last week, the irrepressible tax dodger declared: "If you ask me what would crush my vitality, I believe it would be the judge's not-guilty verdict. That would hit me harder than a guilty verdict. My psychological power comes from fighting a battle in which I've been unfairly, horribly and absurdly treated." He got his wish.

This file is automatically generated by a robot program, so viewer discretion is required.