ER Editor: This item just came to our attention on Telegram. Fox News and Market Watch picked up the story on the US side. The original Le Monde report from 3 days ago lies behind a paywall with a few introductory paragraphs available. To avoid copyright issues, view those paragraphs here (English version). Our summary is below.
BNP Paribas, Société Générale, Exane, Natixis and HSBC offices searched as part of tax fraud scandal
Ostensibly, this story is about these five named banks long having allowed overseas clients to avoid dividend taxation using a practice by the strange name of ‘CumCum’ (Latin for ‘with with’). The banks named above were raided this past Tuesday, March 28 as part of an investigation launched by France’s national financial prosecutor. Le Monde notes that they are suspected of ‘aggravated money laundering stemming from aggravated tax fraud.’ Germany is also part of this investigation.
CumCum apparently results in the loss of several billions in tax revenue each year. Financial institutions perpetrating this practice set up ‘complex financial operations to avoid paying taxes on dividends due by shareholders of listed companies’. First identified in 2017 in France but further back in Germany, judicial and tax authorities are now promising to wipe it out. As a practice, it permits clients to briefly divert stocks and shares abroad. The Fox News article linked to below has this to say:
According to the Times, the strategy involved shareholders transferring stock for a short time to investors abroad to avoid paying the tax on the dividends. In some cases, shareholders were able to get a tax refund. Investors then sold the shares back to the original owner, and both parties pocketed the savings. …
The investigation reportedly stretches to four continents and targets dozens of banks and as many as 1,500 suspects.
Notice how the authorities are going after very high-end clients of these banks, using people who don’t necessarily reside within the country. It’s not targeted at the ordinary person, in other words.
Here is Barbara Kollmeyer’s piece for MarketWatch:
French prosecutors raid banks over dividend tax evasion allegations
Of note regarding Germany:
Last month saw German prosecutors raided homes of more than a dozen HSBC employees and former managers linked to a similar probe that authorities have been investigating for nearly a decade.
and Danielle Wallace at Fox:
French prosecutors raid Paris big banks in tax fraud sweep
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