Scores Of German Banks, Other Bodies In Tax-Fiddling Scandal - Report

Tom Burroughes

12 June 2017

Media reports are claiming that one of the largest, if not the largest financial scandals in German history saw banks and other institutions manipulate the tax code, resulting in Germany losing almost €32 billion in lost revenues.

According to a report by German publication Die Zeit, “banks, stockbrokers and lawyers spent years ensuring that shareholders were refunded money they weren't owed. In particularly egregious cases, they received several refunds on taxes that were only paid once.”

The scam has been investigated by authorities for some time. It is claimed that in some cases authorities have ignored certain practices. Warnings were first aired as far back as 2012, the German publication said on its website.

One ploy involved banks and stockbrokers buying and selling shares for foreign investors in a way which allowed them to claim a tax refund for which they were not eligible. In the years from 2001 to 2016, taxpayers lost at least €24.6 billion due to this method, the report said, citing research carried out into the matter by Christoph Spengel, the chair of international taxation at the University of Mannheim. Another technique involved investors and banks buying and selling shares immediately prior and after dividends were paid. By making use of a process that allows more than one person or institution to simultaneously own a share, they were able to claim tax refunds. This ploy cost around €7.2 billion in damages, the report continued. Since 2012, such practices have been banned.

More than 40 German banks, and 100 banks and funds around the world took part in the behaviour, the report said. It did not identify organisations by name.

“A team of reporters from ZEIT ONLINE, ZEIT and the German public broadcaster ARD spent half a year examining secret investigation documents, transaction tables, emails, account statements, certificates, records of police searches and seizures and logs of intercepted telephone calls. Reporters traveled to the sites where such transactions originated, including the United States, Britain and Switzerland, and spoke with state prosecutors, the accused, those who were financially disadvantaged, whistleblowers, researchers and a former German finance minister,” the publication added.