- High tax losses due to cum/cum share deals
Bavaria's tax authority is making slow progress in recovering outstanding tax claims from questionable Cum/Cum stock deals. The Munich Finance Ministry estimates the remaining tax loss risk at 181 million euros in response to a parliamentary query from the Greens.
The Greens criticize the slow pace.
Of the originally due amount of around 222 million euros, only around 34 million has been paid or is no longer legally enforceable. The Greens criticized the slow pace.
Cum/Cum transactions following the previously common pattern have been banned since 2016. In these deals, German banks temporarily took over foreign-held stocks just before dividend record dates, received refunds on withheld taxes, and then returned the stocks to their original owners. As these deals served solely to avoid tax payments and had no other economic purpose, the federal government tightened the rules in 2016.
"With Cum-Cum deals, the state government is obviously turning a blind eye," criticized Tim Pargent, the Greens' finance spokesman. "In over eight years, it has not managed to set up a well-staffed team to recover the millions." The recovery rate for similar Cum/Ex deals is much higher, according to the ministry: of 410 million euros in potential tax loss, around 355 million has been recovered or is no longer enforceable.
Pargent suspects that the state government is treating domestic banks that benefited from Cum/Cum deals with kid gloves. He sees "the old CSU crony culture" at play. "With sufficient political will, it would be easy to clean this up," said the Green MP. "A centralized Cum-Cum special unit with sufficient staff is needed to investigate and clear up the mess. The state government just needs to make it happen."
The Commission has expressed concern over the slow progress in recovering tax claims, given the significant tax loss risk of 181 million euros. The Greens' finance spokesman, Tim Pargent, has criticized the state government for failing to establish a well-staffed team to recover the millions lost in Cum/Cum deals.
