Banks cheated the German state out of billions with cum-ex transactions. The damage was even greater due to cum-cum transactions. New documents show how closely banks were involved.
German banks have to pay billions in back taxes because of illegal stock transactions. This is shown by a letter from the Federal Ministry of Finance to the Finance Committee of the German Bundestag, which the “Bayerischer Rundfunk” reported on. The paper is available to the German Press Agency.
Accordingly, the financial regulator Bafin has asked banks several times in recent years what consequences participation in cum-cum transactions could have for financial institutions. The supervisors wanted to know how much back taxes could be paid and whether banks had set aside provisions. Bafin explained that around 1,500 German banks and selected securities institutions took part in the survey. The evaluation showed “that there is no risk of insolvency at the affected institutions.”
Third survey, even higher additional payments
According to Bafin, in an initial survey in 2017, only a small proportion of banks stated that they were directly involved in cum-cum deals, the letter states. “The possible financial burdens have been estimated at around 610 million euros; provisions amounting to around 273 million euros have already been made.”
In the second Bafin survey from 2020, the banks gave significantly larger values: According to this, the amount of possible financial burdens was 960 million euros, of which around 530 million euros had already been transferred back to the tax authorities.
According to a third survey, the tax burden from cum-cum deals amounted to a good four billion euros. “Of this, around 1.33 billion euros have already been offset and provisions have been made for possible tax back payments amounting to around 0.74 billion euros.”
In cum-cum deals, shares held by foreign investors were transferred to domestic shareholders, such as banks, shortly before the dividend record date. These were able to have the capital gains tax credited or refunded. The shares and dividends were then returned and the tax savings were shared. At the beginning of 2020, the Hesse Finance Court decided that cum-cum deals were abusive tax arrangements.
Similar to Cum-Ex, but greater damage
Cum-cum deals are considered the big brother of cum-ex deals, with which banks cheated the state out of an estimated double-digit billion sum. In contrast to cum-ex transactions, in which there have already been several judgments, for example against the tax lawyer Hanno Berger, the processing of cum-cum deals is still at the very beginning. The dimension is also larger: Mannheim financial scientist Christoph Spengel estimates the damage caused by cum-cum to the tax authorities between 2000 and 2020 at 28.5 billion euros.
Gerhard Schick, who heads the Citizens’ Financial Transition Association, called for more speed in the processing. Banks should not be allowed to get away with illegal transactions at the expense of taxpayers. The politically responsible people in the countries must “finally set the course for tax investigations and public prosecutors to ensure that these billions can really be recovered.”
Source: Stern
