Tax evasion system accused of costing billions to European countries

Handling of dividends involving banks and financial funds have hurt about ten European countries by nearly 55 billion euros in taxes since 2001, say 19 media in a joint investigation released Thursday.

This work, carried out inter alia by the German website Correctiv, and press titles such as Die Zeit, Le Monde or Reppublica, is based on court documents from Germany, where these maneuvers were discovered in 2012. It concerns both cases of fraud and tax optimization.

In addition to Germany, by far the most affected country, ten European countries are concerned: France, Spain, Italy, the Netherlands, Denmark, Belgium, Austria, Finland, Norway and Switzerland.

The bulk of the bill, about 46 billion euros, is linked to an optimization practice called "cum cum". This technique, located according to this media group "at the limit of legality", plays on the differentiated taxation between domestic and foreign investors.

Taxed more heavily on the dividends they receive, domestic investors resell for example their securities to foreign investors, for a short period to escape this tax, and then recover them.

This mechanism alone would have cost in 24 years 24.6 billion euros to Germany, 17 billion to France and 4.5 billion to Italy, says this joint investigation, on the basis of information from the tax authorities and judicial and market data badysis.

In France, "up to three billion euros a year” would have been lost for public finances because of these maneuvers, writes Le Monde, which ensures that the three main French banks (BNP Paribas, Credit Agricole and Societe Generale) have resorted to it.

"identified problems"

To this technique of cum cum” added a clearly fraudulent practice dubbed "cum ex” and attributed to a German lawyer, Hanno Berger, now subject to one of the criminal investigations opened in Germany and pending trial.

It is this time to buy and sell shares around the day of payment of the dividend, so quickly that the tax administration no longer identifies the true owner.

The manipulation, which requires the agreement of several investors, allows to claim several times the same tax credit on profits attached to the dividend, thus hurting the taxman.

This scam would have cost 7.2 billion euros to Germany, 1.7 billion in Denmark and 201 million euros to Belgium.

Asked by AFP, the Norwegian tax authorities said they discovered a fraud involving 580,000 Norwegian kroner in 2013 and foiled several subsequent attempts, once warned by Denmark. The country has since strengthened its controls.

"The problems are perfectly identified by the French tax authorities.If the infringements are confirmed, we will be intractable," reacted on his side the French Minister of Public Accounts, Gérald Darmanin.

Solicited by AFP, the French tax administration refused to confirm or comment on the figures provided by the 19 media involved in the investigation. "This is not a problem of magnitude", however, it was badured.

The Danish public prosecutor's office, who has been seized with the subject since 2015, explained that he was looking for "whether there is a basis for criminal liability of persons or companies involved," according to his spokesman Simon Gosvig.

The publication of this survey was welcomed by the European deputy and ex-magistrate anti-corruption Eva Joly, who called in a statement justice to "diligently urgently” investigations and states to "strengthen their legislation".

In Austria, the Social Democrat opposition (SPÖ) demanded that Conservative Finance Minister Hartwig Löger provide an badessment of the damage suffered by his country. "The finance minister must finally provide an overview of the amount of the damage," said the party's finance spokesman, Jan Krainer.

19/10/2018 07:40:19 –
Berlin (AFP) –
© 2018 AFP