Cum Ex scandal: Sant berates Commission for mild reaction to €55 billion theft

Labour MEP Alfred Sant has laid in the European Commission for its mild condemnation of the major banks involved in the so called Cum Ex scandal. 

Sant told the European Parliament that if banks from Cyprus, Greece or Malta had been involved in the Cum Ex scandal the ongoing naming and shaming proceedings would not have been so mild “as it was with banks in the larger member states involved in this scandal.” 

The Cum Ex scandal revealed that an organised group of bankers had stolen over €55 billion from the public funds of several Member States, notably France and Germany, over the past 15 years through the so-called Cum-Ex deals. It was revealed that bankers, lawyers and other intermediaries were trading shares and receiving tax reimbursements for tax that had never been paid. 

For the last few years, German authorities have been investigating hundreds of the tax fraud cases, where banks and stockbrokers rapidly traded shares with (“cum”) and without (“ex”) dividend rights, with the aim of being able to conceal the identity of the actual owner and allow both parties to claim tax rebates on capital gains tax that had only been paid once. 

At least 10 other European countries beyond Germany have been affected by the tax fraud practices, and that the damage caused to state treasuries could be as high as €55.2 billion. 

Spain’s Santander bank is the latest big lender to be caught up in the scandal. According to the confidential documents released to the media organizations, Cologne prosecutors opened an investigation into Santander's role in June and have determined that they were involved in carrying out the trades. 

A letter from German prosecutors to Santander's lawyers shows that they suspect the bank of having “planned and executed trades" that facilitated “severe tax evasion” from 2007 through 2011. 

The scandal came to light in 2016 when it emerged that several German banks had exploited a legal loophole which allowed two parties simultaneously to claim ownership of the same shares. 

Sant has abstained on the resolution ‘The Cum Ex Scandal: financial crime and the loopholes in the current legal framework’, while fully agreeing with the need to curb all abuse of tax reimbursement schemes. 

“Problems arise when the foreseen measures to end these practices go beyond their objective and are used as a pretext to introduce tax harmonisation. Enhancing tax transparency and exchange of information in this field must be seen and must be implemented as a proportionate solution in the context to which it applies, as well as in its effects,” Sant told the EP. 

“Member States must be left with their full tax sovereignty. Indeed, given its potential impact on the integrity of financial markets, the future Directive on Administrative Cooperation in the field of taxation should include transparent exchange of information on tax refunds and dividend arbitrage.”