Black Markets

Danes Grab for Tax Revenues By Killing Cash

This might be a job for...bitcoin


Denmark strides boldly into a cashless future. Demand for the folding stuff is falling and everybody prefers electronic transactions anyway, we're told. So the government proposes to eliminate requirements that retail businesses accept cash—which may be a wise idea given that the Danish central bank will stop making any more of the stuff next year. It's all to relieve beleaguered Danes of the time and expense involved in security guards, surveillance systems, and making change. A world of electronic transactions will be so much easier for the country's residents, and their fearless political leaders have their backs.

Oh bullshit. This is all about the country's booming shadow economy and the government's efforts to boost its tax take.

Last October, Danmarks Nationalbank announced, "demand for new banknotes and coins has been falling for some years, and Danmarks Nationalbank does not expect the trend to reverse… Consequently, Danmarks Nationalbank has decided to initiate a process to discontinue internal printing of banknotes and minting of coins during 2016."

Now, the Danish government is proposing a set of related policies. According to Quartz:

Currently, Danish companies are required to accept cash payments, which "involve considerable administrative and financial burdens," the finance minister, Bjarne Corydon, said.

For instance, he said retailers spend a fair amount of resources on security guards and surveillance systems, as well as spending the time to make change for customers. Grocery stores, dentists, doctors, post offices, hospitals, and nursing homes are among the establishments that would be excluded from the proposed rule.

If the change is implemented, it could mean that retailers, restaurants and gas stations would be able to turn away customers who don't have access to electronic payments as early as Jan. 2016.

The idea is that transaction costs, as well as crime, go down when physical currency is eliminated.

Huh. 2016 again.

Anyway, it's worth knowing that Denmark has the highest tax rates in the world—nearly half of GDP is taxed. The tax burden is also rising faster there than most places, says the OECD. "the tax burden in Denmark increased by 1.4 percentage points from 47.2% to 48.6, the fourth largest increase amongst member countries in 2013. The corresponding figure for the OECD average was an increase of 0.4 percentage points from 33.7% to 34.1%."

Unshockingly, Danes have become awfully good at doing things off the books, so that they don't have to pay those taxes. A recent study of shadow economies gave Denmark extra attention and found that "52% of those questioned had had undeclared work done for them in the previous year." Almost half the workforce in construction and agriculture labors, at least sometimes, off the books—the overall number is 32 percent of the workforce. And the practice is widely accepted. 

This makes the Danish government feel sad and rejected. It spends all that time to hike tax rates, and people turn their noses up.

Vendors of electronic payment systems sniff an opportunity here. Would you believe that Visa Europe commissioned a 2013 study that concluded, "Increasing banking inclusion and the use of electronic payment systems brings more transparency to transactions and makes participating in the shadow economy more difficult."

And here we are in 2015, with the Danish government so helpfully pulling cash out of circulation to ease the worries and woes of its population with electronic transactions. So thoughtful.

But here's the thing: There really is opportunity here, and not just for Visa Europe. Faced with strict currency controls and ridiculous official exchange rates, Argentines have also turned to electronic payments—in bitcoin. The difference between those transactions and Visa's offerings, though, is that the bitcoin payments are deliberately structured to avoid government monitoring and control. Which might make the digital currency just a little more attractive to other people who have put so much time and effort into evading official scrutiny in their economic lives. The Danish government even takes an official hands-off approach to bitcoin, discouraging its use, but not attempting to impose regulations.

That's no guarantee that bitcoin will take off in Denmark. Maybe it's not the right solution and people will just conduct their off-the-books transactions in euros, dollars, or silver coins. But there's obviously a new battle being waged between government officials anxious to grab a piece of every transaction they can chase into the open, and people just as eager to keep out of the tax man's reach.

Given those tax rates, I'm betting on people's creativity to keep the shadow economy thriving.

NEXT: Matt Welch: Don't Close the American Mind

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  1. The more you tighten your grip the more star systems will slip through your fingers.

    1. Didn’t prevent Tarkin from obliterating Alderaan, though. I fully expect liberal democracies to torpedo their own economies before giving an inch on welfare or monetary or economic reforms.

      1. There will be bad times but reality will win. Canada and America both had horrible policies for a couple decades before a bunch of them got trashed in the ’80s and ’90s. The world is too competitive for this kind of stupidity to last. Even the fed central bank can’t keep the party going forever.

      2. This. This loudly from the mountaintops

      3. Peter Cushing was awesome – he got to be Darth Vader’s supervisor.

        1. The original trilogy really had some actors that gave the franchise gravitas. As a young lad in the theater in 1978, it gave me chills.

          Star wars was the first sci-fi movie that was serious fucking business.

          Roguish characters shooting first, people getting their arms cut off, Peter Cushing (Dracula) interrogating a soft, lovely princess with all the intensity of a Nazi commandant, sir Alex Guinness playing a wise, comforting but capable martial arts master? I mean, come on!

  2. Eh, there’s a perfectly (OK, imperfectly) functioning Euro right next door. Shadow economy will just slip into Euros, or US dollars, or some other currency. This is how a lot of places with completely shitty currency continually debased by government function.
    Those places do tend to be in Africa or South America, so Danes should perhaps think twice, but…

    1. That is a very good point. This will not stop the underground economy. What it will do, however, is set the middle class up to be completely fucked if there is ever a banking crisis. Law abiding middle class people are likely to go along and leave their money in the bank and without cash be unable to get it back once there are capital restrictions.

      1. It also means the Danish central bank is cutting itself out of the underground market. This is bad for their currency and case of ‘short term gain long term pain’ for state power in Daneland.

      2. In places where the shadow economy ethic is generally accepted, or where the situation is bad enough you have little to loose, the middle class is already participating in it, like Denmark or Argentina as cited. You don’t get those statistics from a random small sample without massive amount of participation.

        Back in 2010 there was this about Danish’s affinity for offshore tax havens:…..expanding/

        The sheer scale of potential tax evasion committed by Danes has led the Government to delay its upcoming tax amnesty program.

        However it also occurs on a local scale where police regular raid lower-class markets (the farmer’s markets / flea market types) since evasion is already so widespread. I’m certain everyone keeps a good chunk of their cash received under the table outside of the banks.

        With regards to Argentina, it’s even more pervasive, with low level police complicit in the crime of trying to protect a functional shadow economy from a dysfunctional government:…..-argentine

    2. BUT — Danes paid electronically will have to buy that foreign cash electronically, leaving an audit trail of sorts.

      It’s one reason I withdraw cash and buy gas and groceries with the cash.

  3. Won’t banning cash have a disproportionate effect on the poor, who may not have access to electronic payment methods? I thought these tax-and-spend types loved poor people.

    1. I don’t know about denmark but the U.S already gives the poor their money on a debit card.
      Whats not talked about is when the government refuses to take cash for payments people will have to have at least a portion of their monies in electronic form and when the grocer won’t accept gold for food people will have no choice but to switch.

      1. I was thinking of working poor, who either work for cash or who still cash paychecks. Then there are the people at the bottom, say street folk who panhandle. And what about musicians busking on the street? Will they have to carry around those little gizmos like Square to get tips? (I know some musicians who are starting to carry those for merch sales and the like, but those are folks at least one step above the buskers.)

    2. I’m oversimplifying, but some cashless advocates argue that cash is the enemy of the poor, because cash can be stolen from them.

      I don’t buy the argument because any property that is pilferable can be stolen. Should the poor not own property (the thing that makes you less poor)? is electronic theft of electronic currency not possible?

      1. I’m oversimplifying, but some cashless advocates argue that cash is the enemy of the poor, because cash can be stolen from them.

        The same people advocate against the police defending property. They don’t want to help the poor, they want to control them.

  4. …nearly half of GDP is taxed.

    Damn. That’s a lot of patriotism.

    …52% of those questioned had had undeclared work done for them in the previous year.

    Have they considered placing a tax on unpatriotism?

  5. Control the coinage and the courts ? let the rabble have the rest.

    1. Think again, Corrino.


  6. “retailers spend a fair amount of resources on security guards and surveillance systems…”

    And how is getting rid of cash going to change this? They still have to protect their merchandise, right?

  7. cash is the enemy of the poor, because cash can be stolen from them.

    Stolen by strippers, drug dealers, and the dreaded Korean likker store owner.


  8. everybody prefers electronic transactions anyway, we’re told.

    Every corner convenience store, ever, begs to differ.

  9. My mom makes $70 every hour on the computer . She has been fired from work for 9 months but last month her pay was $18079 just working on the computer for a few hours.
    See here. ?? ?????????

  10. Euro? I mean… this does not seem like rocket science.

  11. So what Tuccile is saying is that something is rotten in the state of Denmark?

    I’m disappointed that I’m the first to make this joke. You guys need to be on the ball.

    1. You’re really fishing there.

  12. The difference between those transactions and Visa’s offerings, though, is that the bitcoin payments are deliberately structured to avoid government monitoring and control.

    Uh…Hold your horses there. There have been at least three studies showing that Bitcoin is susceptible to chain capture. That is, if one or more miners are able to mine enough coins, they control enough of that chain that they can effectively counterfeit the rest- no one can validate that their chain is genuine.

    Of course, it would be a rather gargantuan task- costing several billion dollars- to manage. Then again, this is a pittance even for these smaller Euro governments. And countries like the US are blowing 10 – 12 billion dollars on datacenters all around the country running massive map-reduce clusters that can be re-tasked from their spying on grandma to mining bitcoins at the drop of a hat.

    Governments have all the resources necessary to subvert Bitcoin, among several other crypto-currencies. They just lack the will right now. I guarantee that the first country to see massive penetration of CCs in their market will see its government divert serious resources towards removing that threat.

    1. I’m sure BTC can be modified or an altcoin made that gets around that. MaidSafeCoin does just that I think. It’s built to avoid concentration of mining.

  13. For libertarians, illegal enterprises (drugs, gambling, hookers,etc.), and cash business owners, the minus is that they will have to pay taxes on their revenue.

    This is the BEST thing practically everyone else.

    1. 1) No it isn’t stuff will get more expensive for them too.

      2) Everyone else can fuck off.

  14. Anybody else read Heinlein’s I Will Fear No Evil written in 1970? There’s a scene where the protagonist tries to pay cash for some clothing and the shop rejects it, but after some bribery goes ahead with it.

    Goddamn soothsayer he was.

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