Challenge 

Until recently, the Danish Ministry of Taxation faced a significant challenge in efficiently collecting unpaid debts while strictly adhering to legislation. The existing debt collection system, EFI, was never fully operationalised, leading to an accumulation of public debts from both companies and citizens. This inefficiency not only impacted the public purse but also eroded public trust in the taxation system. The complexity of transitioning to a new system while running the old and new systems in parallel for several years added to the challenge, especially given the intricate nature of Danish legislation. 

Solution 

In May 2017, Netcompany implemented the first release of a new debt collection system, with the goal to efficiently collect unpaid debt in strict accordance with legislation. The new system was developed for the Implementation Centre for Debt Collection (Implementerings Center for Inddrivelse, ICI) which is part of the IT and Development Agency under the Danish Ministry of Taxation. The new system has replaced the former debt collection system, EFI, which was never fully operationalised. 

Since its implementation, the new debt collection system has enabled the Danish tax authorities to recover debt from companies and citizens to the public purse, which was more than DKK 150 billion by the end of 2023. 

The IT and Development Agency and Netcompany worked closely using a joint agile framework with full stack feature teams and mutual process-insight to ensure that the new system would have both managerial and organisational ownership and be able to fully support the highly complex Danish legislation. 

By the end of 2023, all newly incurred private debt transitioned to the new system, and only new business debt will enter the old system. From 2024 to 2027, it is expected that newly incurred business debt will shift to the new system, ensuring that no new debt accrues in the old system. 

Especially efficient is salary withholding where the automated process ensures that a part of the debtor’s salary is used to cover their debt, based on an individually and automatically calculated ability to pay. 

A very efficient and highly automated offsetting component makes sure that public payments to citizens or companies are used to offset any debts before payout. For instance, the solution ensures that registered debtors who have paid a surplus tax will automatically have their debt deducted from their surplus amount during the annual tax return. 

Close to 700 claimants will send claims to the system, either via a portal or a B2B interface. The online portal is a user-friendly self-service tool for claimants to submit their debt claims and handle manual processes optimally. The B2B interface integrates with the individual claimants’ systems directly to the Danish Tax Authorities debt collection solution enabling larger entities to automate their sending of claims to the debt collection solution as well as receiving reporting for financial reconciliation. All claims are validated by a component that utilises a number of complex validation rules, which provide quality assurance of the data that is sent to the debt collection system. 

The program has been on track, meeting all its deadlines and milestones in all its six major releases. In parallel to the ongoing development, Netcompany is responsible for the support, operation and maintenance of the complete solution used by the Danish tax authorities. 

Results 

The system has introduced a new level of efficiency in the digitised collection of public debt, thereby strengthening public trust in the Danish taxation system. A notable feature of this system is its support for the automatic validation of incoming claims, significantly reducing errors in the tax collection base. Additionally, it offers a self-service tool that allows claimants to manually submit claims for public debt. Further enhancing its efficiency, the system supports the receipt of claims directly from claimant systems through a B2B gateway, ensuring the efficient and proper handling of large volumes of claims. 

Since its inception, the system has received 61 billion DKK in debt and 7 billion in interest from the old collection system, along with an additional 6 billion in interest, bringing the total debt received/generated to 74 billion. Out of this, 1 billion has been written off, and 3 billion has been recalled or corrected by claimants.

The system has been utilised by 692 claimants who have sent claims to PSRM. 

In terms of conversion numbers, 28.5 billion in debt has been converted from the old system. Of this, 4.6 billion DKK have been collected through the PSRM, and 0.5 billion have been depreciated. This demonstrates the system’s effectiveness in managing and collecting public debt, underlining its vital role in the country’s financial infrastructure.