Tricks used by banker and brokers to manipulate tax payments and refunds have cost the German state a whopping €31.8bn since 2001, according to research by Mannheim University professor Christoph Spengel. He shared the findings with Die Zeit and broadcaster ARD.
As reported by The Local, the money was swindled through banking and broker practices called “cum-cum” and “cum-ex” trades.
“Cum-cum” trades are when German banks borrow a foreign investor’s shares in a company right before a dividend payment, which means they can use a loophole in German law that allows domestic investors to claim a credit on taxes on dividends that foreign investors cannot claim. Basically, this means the foreign investor can avoid the tax on dividends.
These specific deals are estimated to have cost Germany €24.6bn since 2001, according to Spengel.
“Cum-ex” trades are similar, but essentially allow for multiple refunds filed on capital gains taxes that were only paid once to tax authorities.
Spengel calculates that these deals cost the German state €7.2bn between 2005 and 2012.
Cum-ex trades were prohibited in 2012, cum-cum trades in 2016.
“This is the biggest tax scandal in the history of the Federal Republic of Germany,” said Spengel.