Filing your tax returns can be complicated. But, even if you’re not a tax expert, there is a basic rule you’re probably aware of: You can’t claim back taxes you haven’t paid.
Yet, to put it simply, bankers across Europe were doing exactly this between 2006 and 2011. In a complex scheme that took advantage of legislative loopholes and involved financial market actors at all levels, they claimed refunds on capital gains taxes that were never paid. This may have cost European countries up to €55 billion.
This week, the first tax fraud trial related to these so-called ‘cum-ex’ deals got underway in Germany. It will be decisive, not only because of the €440 million worth of tax losses involved. The loophole allowing ‘cum-ex’ trading was closed in 2016; the court will now have to decide whether the scheme was illegal before that, too.
The possibility that this could all be legal illustrates the importance of strong regulation not just of financial markets, but of lobbying activities, too. Hartmut Bäumer, Chair of TI Germany, said that scandals like ‘cum-ex’ have been possible because lobbyists for the financial industry “were so influential that legal requirements were adapted to the interests of companies, or licenses were granted contrary to legal regulations.”
Free and accessible registers of lobbying activities help media and civil society keep track of potential undue influence on political decision making. Check out our EU Integrity Watch platform for an example.
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