The European Parliament called on Thursday for the launch of an investigation by the European Union’s financial oversight authority into the CumEx tax-fraud scandal. Unearthed in 2012, the fraud was thought to be limited to Germany but seems to have affected 10 other countries, including Belgium. A consortium of investigative journalists estimates that its cost is at least ten times higher than originally suspected.
In addition to Germany, the tax fraud reportedly affected Austria, Belgium, Denmark, Finland, France, Italy, the Netherlands, Norway, Spain and Switzerland
It involved banks that facilitated the sale and purchase of shares belonging to foreign investors on the day that dividends were paid out. The speed with which these transactions were made and the lack of communication between authorities in different countries made it difficult for tax administrations to identify the real owners of the shares.
This exposed them to fraudulent applications for tax reimbursements by foreigners claiming to have paid taxes on dividends, which they were able to collect with bogus evidence of having paid the taxes elsewhere. As a result, tax authorities often reimbursed unpaid taxes.
The scam reportedly cost Belgium 201 million euros. It cost the 11 countries an estimated 55.2 billion euros, according to the 19 media houses brought together for the investigation by the German association Correctiv.
The Euro-parliamentarians asked the EU financial oversight authorities to conduct an investigation into the shortcomings of the system and into dividend arbitration. They urged that the rules on mandatory information exchange allow for divulging dividend arbitration systems.