Illegal share deals - Not just cum-ex: billions in back taxes for banks
German banks have to pay billions in back taxes due to illegal share transactions. This is revealed in a letter from the Federal Ministry of Finance to the Finance Committee of the German Bundestag, as reported by "Bayerischer Rundfunk". The paper is available to the Deutsche Presse-Agentur.
According to the letter, the financial supervisory authority Bafin has repeatedly asked banks in recent years what consequences their involvement in cum-cum transactions could have for the financial institutions. The supervisors wanted to know the amount of tax arrears that might have to be paid and whether banks had formed provisions. Bafin explained that around 1500 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
In an initial survey in 2017, only a small proportion of banks stated that they had been directly involved in cum-cum deals, according to Bafin. "The potential financial burden was estimated at around 610 million euros; provisions of around 273 million euros had already been set aside."
In the second Bafin survey in 2020, the banks then stated significantly higher figures: According to this, the amount of potential financial charges was 960 million euros, of which around 530 million euros had already been transferred back to the financial 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 settled and provisions for possible tax back payments of around 0.74 billion euros have been made."
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 saved was shared. At the beginning of 2020, the Hesse Fiscal Court ruled that cum-cum deals are abusive tax arrangements.
Similar to cum-ex, but greater damage
Cum-cum deals are considered the big brother of cum-ex transactions, with which banks cheated the state out of an estimated double-digit billion amount. Unlike cum-ex deals, where there have already been several verdicts, for example against the tax lawyer Hanno Berger, the investigation into cum-cum deals is still in its infancy. What's more, the scale is larger: Mannheim-based financial expert 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 Bürgerbewegung Finanzwende association, called for more speed in the investigation. Banks should not be allowed to get away with illegal transactions at the taxpayer's expense. Those politically responsible in the federal states must "finally set the course in tax investigations and public prosecutors' offices to ensure that these billions can really be recovered."
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- The German Bundestag is currently examining the issue of illegal share transactions, with a letter from the Federal Ministry of Finance revealing substantial back taxes owed by banks due to these deals.
- The Financial supervision in Germany, specifically the Federal Financial Supervisory Authority (Bafin), has been inquiring about the implications of cum-cum transactions for financial institutions.
- The Banks, including around 1500 German banks and selected securities institutions, participated in Bafin's surveys on cum-cum transactions.
- The outcome of the surveys shows that the potential financial burden from cum-cum deals is estimated to be a significant billion euro amount, with around 1.33 billion euros already settled.
- Cum-cum deals, like their smaller counterpart cum-ex transactions, involve the transfer of shares for tax advantages, with shareholders receiving capital gains tax refunds.
- The Frankfurt on the Main-based Federal Ministry of Finance is steering efforts to recover the lost tax revenues, as well as implementing regulations to prevent future such incidents.
- The German Press Agency reported on the issue, noting the potential impact on Germany's financial system and the need for criminality investigations in light of the billion euro amount involved.
- The Federal Financial Supervisory Authority (Bafin) emphasized that while many banks had initially claimed minimal involvement in cum-cum deals, a subsequent higher call for disclosures led to considerably higher financial responsibilities.
- Politicians from various federal states expressed concerns over the long-term implications of these illegal share deal practices, urging more proactive investigations and faster resolution to recover the lost tax revenue.
- Scholz, as a key political figure, has also called for transparency and accountability in the stock business, emphasizing the importance of ensuring fairness and financial integrity in all share dealings.
Source: www.stern.de
