Europe’s top banks allegedly helped wealthy clients across the continent steal 55 billion euros ($63 billion) from multiple governments by making tax reclaims to which they were not entitled, an investigation has revealed. The theft centred around a complex scheme of trading stocks that also involved hedge funds and large international commercial law firms.

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Undercover Journalists Uncover ‘the Biggest Tax Swindle in the History of Europe.’

The undercover probe by 37 journalists from 12 countries shows that about a dozen European countries are affected by the tax scandal, but Belgium, Denmark and Germany were hardest hit. France, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland have also seen some damage.

Dubbed the Cumex Files, the investigation reviewed 180,000 secret documents from banks, stock traders and law firms over a period of more than a year. Interviews with anonymous sources and whistleblowers provided extra detail. “They [the secret documents] demonstrated the extent to which banks and investors could reimburse taxes on stock deals that they did not have,” the Files said.

“These windy financial constructs are called cum-cum (cum means ‘dividend’). A domestic bank helps a foreign investor to get a tax refund that they are not entitled to. The profit is shared between the participants.”

A variant of the scheme, called ‘cum-ex’ (without dividend), would see traders refunded twice or, in severe cases, several times, by the state for taxes buyers or sellers of stock would have paid only once. Share ownership is often difficult to point out because of the complex structure of the schemes, which constitute a form of tax evasion or avoidance.

Both cum-cum and cum-ex went on for decades unnoticed due to different regulations within European Union member countries.

Mixed forms have emerged, the report says, “and new, even more aggressive mutations for which there are no names yet.” The investigative journalists claim that they have uncovered “the biggest tax swindle in the history of Europe.”

“It was a trade that was initially discovered by chance,” a separate video of the Cumex Files detailed. “Yet a group of masterminds turned it into an industrialized cottage industry, from Dubai to London, New York to Dublin taking billions of euros out of the pockets of European tax payers,” it said.

Banks in Up to Their Necks

The investigations revealed how some of the world’s biggest banks have been instrumental in aiding the tax fraud. UBS, BNP Paribas, Barclays, JPMorgan, Meryll Lynch, Banco Santander, Morgan Stanley, Deutsche Bank and Swedish bank SEB have all been implicated.

They allegedly helped tax evaders drill a hole of around $2 billion in Danish state coffers. A tip-off from Danish authorities helped Sweden prevent more than 10 fraud attempts totaling 380 million kroner ($46 million), according to Swedish news agency Di. But that was not before local bank SEB allegedly received 70 million Swedish kroner ($7.8 million) for helping to conceal one billion Swedish kroner ($111 million) from the German treasury.

In Germany, where authorities halted cum-ex trading in 2012, the potential tax losses from cum-cum deals between 2001 and 2016 is anything upwards of 49.2 billion euros ($56.6 billion), according to a 2017 report.

Perpetrators told the investigating team that “it is legal to be reimbursed for taxes that were never paid.” However, governments “assume a tax abuse of design, if business is purely tax-motivated,” the Cumex Files explained.

“The deals are solely for the purpose of collecting taxpayers’ money. Otherwise, there is no value behind the trade,” said the investigators, adding that the schemes started to pick up around 2007 during the global financial crisis, “a time when the state will save the banks from collapse, again with taxpayers’ money.”

European lawmakers have called for an official investigation into the cases. “Tax theft is a crime against society. Europe cannot and must not tolerate this!” MPs in the European parliament said in an online statement.

What do you think about the Cumex Files findings? Let us know in the comments section below.

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