So-called "cum-ex" and "cum-cum" deals -- complex stock transactions around the days when companies pay out dividends -- have cost taxpayers as much as 55 billion euros ($63 billion) in lost revenue or outright fraud since 2001. The schemes were first uncovered in Germany in 2012 and further investigation found evidence of the practice in France, Spain, Italy, the Netherlands, Denmark, Belgium, Austria, Finland, Norway, and Switzerland.
In the cum-cum scam, foreign investors holding shares in a company temporarily sell the stock to a bank based in the same country as the firm ahead of the day dividend gets paid out. This allows them to escape higher taxes on the dividend charged to shareholders from abroad, before buying back their holdings quickly afterward.
Such deals deprived Germany of 24.6 billion euros in tax revenue, France 17 billion and Italy 4.5 billion - all technically legal.
The illegal "cum-ex" deals draw in more parties in a complex dance around the taxman.
Reportedly conceived by well-known German lawyer Hanno Berger, the cum-ex method relies on several investors buying and selling shares in a company amongst themselves around the day when the firm pays out its dividend. The stock changes hands so quickly that the tax authorities are unable to identify who is the true owner. Working together, the investors can claim multiple rebates for tax paid on the dividend and share out the profits amongst themselves -- with the treasury footing the bill.
This practice cost Germany 7.2 billion euros, Denmark 1.7 billion and Belgium 201 million, the investigation found.
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