BRUSSELS/FRANKFURT (Reuters) - Germany’s finance minister will urge European ministers this week to tighten cooperation against abusive tax schemes, after Reuters and other media revealed sham trading deals that cost taxpayers billions of euros.
In comments sent to Reuters, Germany’s Olaf Scholz described a stock-trading scheme to generate illicit double tax rebates as a “scandal” that underscored the need for better European cooperation.
Scholz’s comments, which are his strongest condemnation of the practice yet, will fuel debate about preventing a repeat of schemes, known as cum-ex, which hit Germany, Denmark and other countries.
The practice typically involved trading company shares rapidly around a syndicate of banks, investors and hedge funds to create the impression of numerous owners - each entitled to a tax rebate.
“The cum-ex business was a real scandal that cost the state and honest citizens billions,” said Scholz, adding that he had told his officials to investigate any possible new variations.
“Such tricks cause anger,” he said. “It’s good if we speak in the EU about the exchange of information and whether we should improve it.”
Scholz will deliver this message to EU finance ministers in Brussels on Nov 6.
Danish politicians have already called for action to tackle dividend-stripping after Reuters and other media, coordinated by non-profit newsroom Correctiv, revealed the large-scale use of such trading schemes.
Danish tax authorities say they lost $2 billion, while Germany estimates it was tricked out of more than 5 billion euros by a similar “cum-ex” method. Other countries, including Austria and Belgium, were also hit.
Germany changed and clarified the law in 2007, 2009 and 2012 to stamp out the practice. But the scam hit Denmark in the years that followed, prompting criticism of Berlin for failing to properly warn Copenhagen.
Denmark’s minister of taxation Karsten Lauritzen recently said that “the Danish public needs ... to know if we would have been able to stop the fraud had we received the information from Germany”.
Lauritzen has described international cooperation as “not ... good enough”. The German finance ministry said it had informed other countries, when asked, about how the stock trading scheme worked.
Although most European countries belong to the EU and obey numerous common rules, they have widely different tax regimes. Sharing information around Europe is often piecemeal and fragmented.
National tax authorities are also subject to strict confidentiality rules, making it hard to informally share information.
Germany is now investigating a number of banks for involvement in cum-ex, in what is the country’s biggest post-war fraud probe.
The prosecutors say the players in the cum-ex scheme misled the state into thinking a stock had multiple owners on its dividend payday who were each owed a dividend and a dividend tax credit.
Scholz said he wanted to prevent a repeat. “What counts now is to prevent any new attempts at aggressive, cross-border tax fraud,” he said.
Reporting By John O'Donnell; Editing by Gareth Jones