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by Clotilde Mathieu


Translated Saturday 3 November 2018, by Sarah Robinson

The heist of the century. Two mechanisms, one of which, the fraudulent ‘Cum ex’, enabled the swindling of 55.2 billion euro from eleven European countries, including France, a joint investigation of 19 media outlets reveals.

After the scandals of LuxLeaks and Panama Papers comes ‘Cum Cum’ and ‘Cum ex’, the new tax evasion scandal. A hold-up of 55.2 billion euro, as estimated by the 19 media outlets who have lead the investigation, including Le Monde. Here it is not about any tax haven, but rathrer about avoiding the payment of tax on dividends distributed to shareholders by taking advantage of the little-known arrangements between European countries and of the financial folly.

The devised scheme is based on two mechanisms this time, one legal mechanism called ‘Cum Cum’ enabling the avoidance of tax, based on tax agreements reached between several states, and the other, the ‘Cum ex’, a vast system enabling the illegal reimbursement of tax. The former plays on the differentiated taxation between nationals and foreign investors. This is how, via this simple sleight of hand, the loss between 2001 and 2017 has allegedly been 24.6 billion euro for Germany, 17 billion for France and 4.5 billion for Italy, according to the calculations of the consortium of media set up on the strength of information from the tax and legal authorities and of analyses of market data.

Traders and tax lawyers in an organised group

Then comes the scam, called ‘Cum Ex’, which has allegedly cost Germany 7.2 billion euros, Denmark 1.7 billion and Belgium 201 million euro. An act of fraud is born thanks to the experience of a former German tax auditor who became a renowned lawyer: Hanno Berger. His scheme, which, apart from the spectacular amount of money it involves, gives the affair another dimension, entails the buying and reselling of shares on the day the dividends are distributed, so quickly that the tax authority can no longer identify the real holder. This means that you can claim reimbursement for the same tax on the dividend several times, while this dividend has been paid only once. A scheme in which investment funds, traders and tax lawyers operate in an organised group. The list of countries affected here are limited. Certain countries no longer have this system of tax reimbursement, like France, which has not had it since 2005.

The investigation into CumEx thus claims that fifty of the biggest financial institutions on the planet have taken part in this, to varying degrees. Starting with the banks that once more find themselves at the heart of the system. They have, for example, allegedly provided the necessary supporting documents for the tax reimbursement. According to the Le Monde, some big names of French banks are implicated: BNP Paribas, Société Générale and Crédit Agricole. The paper moreover specifies that, while BNP have not wanted to comment ‘because of an ongoing judicial investigation’, the other two have denied having participated in any ‘illegal operations.’

31.8 million euro squeezed out of the German tax office

The investigation emanated from Germany when a tax officer found a reimbursement request suspicious. In 2012 six criminal investigations targeting Hanno Berger and several stock exchange traders were then opened. At the time, all the estimates of the money extorted from the German tax office ranged from around 30 billion euro according to the press to 5.3 billion according to the German Ministry of Finance. A tax band, which has been reevaluated in the wake of the investigations carried out by the media, is at 31.8 million euro according to the already known calculations of Christoph Spengel, a taxation specialist at the University of Mannheim.

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