Danish commercial property owners have had several headaches about how to deal with the preliminary assessments, which for many owners have meant taxing properties on a basis with no discernible relationship to what is perceived as the property's value in trade and commerce.
If you ask the Danish Valuation Office, the new valuation system was never intended to hit a market value, and the legislation has been amended accordingly.
However, this view is countered by the common sense of justice in this area - if you are to pay your taxes with a certain degree of acceptance, it requires that you are taxed on goods you actually possess and that the tax base does not exceed the perceived value of the good.
A good example is the inventory tax on property - a concept that has thankfully been abandoned by the Danish parliament for now.
It is a fact that the preliminary assessment and the collection of property taxes on this basis are decisions within the meaning of the Public Administration Act.
The definition of a decision under administrative law is (see Legal Guide 2024-2, section A.A.2.2.2.):
- a statement from a public authority,
- which are issued on the basis of public law,
- unilaterally determining what is or should be the applicable law, and
- which are aimed at external recipients
The consequence of being an administrative decision is that the authority must comply with the rules in the Public Administration Act and the Tax Administration Act. The rules ensure that citizens have the opportunity to be heard (the declaration procedure), to correct errors in the factual information included in the decision, decisions must be justified and communicated individually, and you can appeal decisions if you do not believe they have been made on the correct basis.
Therefore, the Danish Parliament has provided a special legal basis for the preliminary property assessments, which exempts the preliminary assessments from being subject to consultation with the parties, from the requirement for justification and which exempts the decisions from being subject to appeal.
The preliminary assessments are generated by machine and it is known that not all relevant factual information is implemented in the system that generates the preliminary assessments. In other words, the assessments are admittedly flawed, but since the state lacks the revenue, it can be collected - and without citizens being able to know the basis for the assessment or appeal the decision.
Politicians tell us that we can rely on a final assessment and subsequent regulation. The politicians' rationale must be that the money is better in the state's pocket than in citizens' pockets while they work on a system that actually works.
And it's not just the calculation basis that's the problem. The cases where SKAT collects the previous owner's tax and perhaps that of the neighbours if the property has been subdivided are piling up.
On 3 April 2024, the Ombudsman criticised the quality of the preliminary assessments of owner-occupied homes in 2022. The conclusion states that
"It is a fundamental part of the activities of public administrative authorities that they should be organised and carried out in a way that supports public confidence as far as possible. In my opinion, the publication of the highly biased preliminary assessments was not suitable for supporting trust in the tax authorities. Additional prior quality assurance would also have contributed to better realising the objectives of trust stated in the introductory remarks to the bill behind the original Property Assessment Act (bill no. L 211 of 3 May 2017): "Trust in the public property assessments must be restored. The assessments have been too imprecise, inconsistent and opaque. Property owners and homeowners must have better and more accurate assessments."
And how does the Danish Valuation Office think this harsh criticism can be implemented now that it's time for the preliminary assessments of commercial properties in 2024?
After receiving responses to a large number of access requests on behalf of everyone from professional property owners to housing associations, it's clear that nothing has changed.
The standard letter that the Danish Valuation Office sends out with all decisions on access to documents states that you get access to a data file (json). On a larger property, this amounts to around 700 pages of data codes that can only be read by the assessment system. However, it comes with a reading guide that, along with an education as a programmer, may or may not help the reading process along. The agency emphasises that since there is no right to a hearing or justification, there is nothing other than the machine-generated material.
Therefore, there is still no real possibility for an owner to assess what information is included in the assessment, and trust in the assessment authorities and the system is gone.
Can't we gain insight into the information that the system has been fed with in order to make the assessments, asks the persistent reader? Unfortunately, no, as the right to compile databases (data extraction) according to section 11 of the Public Access Act requires that it must be possible to compile data with a few simple commands in order to minimise the resource burden on the public administration. This option is not built into the assessment system, and due to the complexity of the data and the difficulty of finding out which model run was used and which enrichments, corrections and corrections have been made to the data subsequently, the citizen cannot make use of this very basic right in the Public Access to Information Act.
Often during the process, I have been called by friendly employees at the agency who just needed some information from me so that they could choose from the various templates for standard decisions that they had developed. My enquiry had to fit into one of the predefined categories of partial refusal of access to documents that they had on hand. Nevertheless, it became necessary to send some of the material by physical mail as there was apparently something wrong with the data file, which kept failing.
Before the next general election, I would like to hear whether this was the legal situation that the Danish Parliament was aiming for when it considered the rules that would limit the resources required for the tax authorities to process preliminary assessments. Would they have made the same decision if they had known that reducing the administrative burden on the public sector would significantly weaken the incentives for making correct and understandable decisions - citizens don't need to understand the decisions and they can't appeal them anyway? Would they have passed the law if they had been made aware that the derogations from the Public Administration Act were about essential legal safeguards of fundamental importance for our confidence that the decisions we receive from the public sector are correct and can be understood by the recipient?
Did anyone consider the administrative burden on the affected citizens - be it tenants, co-operative owners, homeowners, business owners or landlords? Formally, there is a duty to do so in the legislative process, but was the parliament given accurate information prior to the passing of the bill?
There is only one thing to do if you are affected by SKAT's property valuation, and that is to find yourself a qualified advisor. For now, the levy will run on this basis until the Assessment Agency has finished calculating the assessments, but what will you actually have to pay? In the meantime, owners must do their best to deal with residents and commercial tenants who basically don't know how their finances will be affected by the new tax system, and who may not even live in the property anymore when the correct assessment lands on the owner's desk, probably in 2025.
And that's another big problem in terms of legal certainty.
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