The Belgian tax authorities have filed seven lawsuits in the southern district of New York against a number of American citizens and one pension fund, claiming tax evasion.
The cases are an offshoot of the s0-called CumEx scandal, which involved fraudulent claims for the repayment of withholding tax, which broke in 2018. Then, 11 European countries were involved in a scam that cost the taxpayer €55.2 billion, in what was described as the biggest case of tax fraud ever.
Belgium suffered losses of a relatively minor €221.5 million – compared to Germany’s €32 billion.
The present case involves withholding tax, which is levied on dividends from shares and bonds, withheld at source by the bank that pays out the dividend.
The accused in the present cases claimed to have paid withholding tax in the US on shares from a whole array of major companies, which because of a double-taxation treaty with the US, they were entitled to have repaid to them.
The companies listed in the indictment, which De Tijd has seen, include such names as AB InBev, Belgacom (now Proximus), Delhaize (now Ahold Delhaize), KBC bank, Mobistar (now Orange Belgium), Solvay, Telenet, and UCB.
The fraudsters operated internationally, but it is their activities based in Belgium that interest the tax authorities here. They operated through a series of investment companies with names like Ganesha Industries, Lion Advisory and Michelle Investments. Some of the names show up in cases brought by other countries, showing how they operated across borders.
The companies would set up pension funds, and list share-holding in some of the major companies on the list. They would then argue they were paying withholding tax on those dividends in Belgium.
That would entitle them to reclaim in Belgium the withholding tax they were being charged in the US.
But there was a catch: the pension funds were shell companies, who never owned a single share of the blue-chip companies on the list. They had consequently never paid a cent in withholding tax in the US, and were entitled to zero in reimbursement.
However that information only became clear after the payments, an estimated €44.9 million, had been made – something that happens more or less automatically.
The seven court cases in New York concern that sum of just under €45 million directly, and indirectly a further sum covering interest, expenses and penalties.