CumEx-Files
 | |
| Date | October 18, 2018[1] |
|---|---|
| Location | Europe |
| Type | Tax evasion |
| Outcome | Loss of roughly $63.2 billion.[1] |
| Website | cumex-files |
The CumEx-Files is a tax fraud scheme discovered in 2017 by a collaboration between a number of European news media outlets.[1] A network of banks, stock traders, and lawyers had obtained billions from European treasuries through suspected fraud and speculation involving dividend taxes. The five hardest hit countries may have lost at least $62.9 billion.[2] Germany is the hardest hit country, with around $36.2 billion withdrawn from the German treasury.[3] Estimated losses for other countries include at least €17 billion for France, €4.5 billion in Italy, €1.7 billion in Denmark and €201 million for Belgium.[4]
Method
The network stole several billion Euros from the treasury, through what Correctiv calls a "cum-ex" trade:
The participants in the network would lend each other shares in large companies, so that to tax authorities there would appear to be two owners of the shares, when there was only one. The bank that was used in stock trading would then issue a "confirmation" to the investor that tax on the dividend payment had been paid, without it being done. "It’s a bit like parents claiming a child benefit for two – or more – children when there is only one child in the family." writes Correctiv.[1] This practice was outlawed in 2012.[5]
The name "cum-ex" is derived from Latin, meaning "with without", and refers to the disappearing nature of the fraudulent dividend payments.[6][7]
The schemes were legal at the time they were carried out. In cum-ex trades, shares with and without dividend rights were quickly traded between various market participants just before the payout date for the dividend, allowing traders to reclaim double the taxes.
Financial institutions in essence exploited a legal loophole which allowed two parties to simultaneously claim ownership of the same shares, therefore allowing both to claim tax rebates to which they were not entitled.
Authorities have since deemed the reclaims illegitimate, but at the time of the trades, this was less black and white, and a vast network of traders, analysts and lawyers were thought to be involved in the practice throughout the continent. [8]
Discovery
State Commissioner August Schäfer first warned of the practice in 1992, after the testimony of five whistleblowers. However, the practice remained widespread until an administrative assistant in the central German tax office noticed abnormally large tax rebate claims from a US pension fund.[5]
See also
References
- ^ a b c d "Cum-Ex trading scandal in Germany – A huge challenge for financial institutions and the insurance industry".
- ^ "Skattesvindel" [tax fraud] (in Danish). 18 October 2018. Retrieved 18 October 2018.
- ^ Vartdal, Ragnhild (18 October 2018). "Norge rammet av europeisk skatteskandale" [Norway hit by European tax scandal] (in Norwegian). Retrieved 18 October 2018.
- ^ "« CumEx Files » : la fraude fiscale à 55 milliards d'euros" ["CumEx Files": tax fraud for 55 billion euros] (in French). 18 October 2018. Retrieved 20 October 2018.
- ^ a b Hill, Jenny (2017-06-09). "Germany fears huge losses in massive tax scandal". BBC News. Retrieved 2018-10-29.
- ^ Matussek, Karin (18 October 2018). "Santander joins list of banks in German tax-dodge crackdown". Retrieved 20 October 2018.
- ^ "CumEx Files : comment des actionnaires utilisent la Bourse pour arnaquer le fisc" [CumEx Files: How shareholders use the Stock Exchange to scam tax] (in French). 18 October 2018. Retrieved 20 October 2018.
- ^ Smith, Elliot (2019-10-14). "A landmark German tax fraud case could ripple through the finance industry". CNBC. Retrieved 2019-10-15.
External links
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