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The CumEx-Files – How Europe's taxpayers have been swindled of €55B (cumex-files.com)
357 points by hansen 6 months ago | hide | past | web | favorite | 105 comments



correctiv.org is producing phantastic investigative journalism on a regular basis. one of their most important revelations recently was about a pharmacist who was selling heavily diluted cytostatic agents for chemo therapy. several people died because of this [1].

really awesome about correctiv is that they not just release their findings - they really make sure that something is going to be done about it. for example the government didn't do much about above mentioned case - they didn't even bother to inform the patients. so correctiv rented a shop in that town (Bottrop) where people could inform themselves about the matter.

if you want to support them: https://correctiv.org/ueber-uns/#unterstuetzen-sie-unabhaeng....

the one thing I find most concerning about these kind of revelations is that it seems that journalism is more and more responsible for work police should be doing.

[1]: https://correctiv.org/ruhr/alte-apotheke/2018/08/10/trotz-an...


> it seems that journalism is more and more responsible for work police should be doing

I think this echoes a lot of sentiment, if perhaps without concrete evidence, across the world.

How can we solve this?


For people in “democratic” countries, get involved in civic duties. Register to vote, stay informed, volunteer to canvass and spread the word for campaigns. I donate monthly to causes I care about supporting. Corruption reform has taken place through these routes.

Edit-pedantry


"For people in democratic republic countries"

So obviously people from the UK, Norway, Netherlands, and Spain should not get involved /facepalm


First we have to address our ridiculously outdated structure and actually government sanctioned class system.

Having a queen and a ridiculously nationalist political parties has to be the most embarrassing parts of being British.

God (lol) divinely gives power to the queen (lol) through birthrite (lol) and we are her subjects (lol).

It is so deeply offensive that I am meant to he her slave, and its shocking how much idiots dont think it matters.


youre not her slave or subject really though are you? you havent been scrubbing her shoes or done anything at the request of the royal entourage im guessing. shes just a placeholder for tradition and has no say in anything. so really, it doesnt matter. stop getting your knickers in a twist over something so unimportant and irrelevant


The Tories changed this in the British Nationality Act 1981. We are now citizens, not subjects.


Having a queen and a ridiculously nationalist political parties has to be the most embarrassing parts of being British.

I think Boris Johnson does quite a splendid job in the British embarrassment department.


The two (non-mutually exclusive) most realistic options are to:

1) Become a career politician yourself. 2) Put yourself in the top 0.1% wealth bracket, and share your opinions with money.


Embrace the trend and take responsibility for solving unsolved crime and peacefully bringing about justice and/or resolution (ie- inform the uninformed) to the problems for which you have solved.


Nit: it's spelled "fantastic". With the "ph", it made me think of "phantasm", which is a kind of ghost or illusion.


the one thing I find most concerning about these kind of revelations is that it seems that journalism is more and more responsible for work police should be doing.

The police are generally bound by procedural rules that prevent them from doing these kind of investigations, especially where much of the direct evidence (or in many cases, the actual crime itself) is based on entrapment.

However, once journalists have done the dirty work, the police can use their reporting to find evidence that would survive legal challenges to the means through which it was collected.


While I echo your appraisal, they have a hard time not to come across as biased.

for instance:

- In the article you've linked, I'm sure there were better images of a conservative politician to choose from. Small thing, but not for professional journalists

- In the CumEx-article, what information do I gain, when they state that one of the perpetrator's lawyers is a famous face of the German pro-market party FDP - other than that it's good that they aren't part of the government? BTW this politician is known to be a lawyer for defendants in cases with a lot of press coverage. Is he guilty by association? Is thus his party, the people voting for them?

- Their focussing so much about the new right-wing populist party AfD

And what of course will always make the tinfoil hats spin:

- Being funded (among others) by George Soros


Agreed. I understand everybody's got biases, and that many in media lean left. But doing pretty stuff like that, clearly intended to score a few cheap points, might turn many people off some truly high-quality content.


Agreed, but it goes even further, as it open up attack surface for the other side to discredit a story, and more importantly, the story teller, tainting all future stories. I understand that media writes for their readers, but I think it's a lesson one has to learn to actually affect change and convince the other side.


There is no such thing as an unbiased press; the choice of what to report and what counts as "news" is inherently an opinion. It is also ridiculous to pretend that there isn't a substantial rightwing bias in a large number of media organisations, through their funding, ownership, and clickbait willingness to support manufactured "controversies" that harm real people.

A latest example: https://www.politico.com/story/2018/10/16/washington-post-lo... "Washington Post told lobbyist: Quit working for Saudis or stop writing for us". Admittedly that's in the "opinion" section, but the line between the two is very thin.

Given this the only thing you can do is find reporting that does a reasonable job of finding the answers, is consistent with your own values, and doesn't have to issue too many retractions for obviously stupid things they got suckered/biased into printing.

The choice between "holding power to account" versus "supporting the existing power structure and its prejudices" is both a key partisan divider and the only reason for press to claim a public interest defence in the first place.


> Given this the only thing you can do is find reporting that does a reasonable job of finding the answers, is consistent with your own values, and doesn't have to issue too many retractions for obviously stupid things they got suckered/biased into printing.

Alternatively, you can just read multiple news sources (ideally some from other countries as well) and compare them on their coverage of the same event. It's pretty enlightening to see what each source covers and what is their take on it.


One of my go-to sites for this: https://www.allsides.com


Coverage by foreign reporters adds another dimension: stories that embarrass both of the domestic political camps. A recent example would be British coverage of a Democratic legislator playing a cell phone game during Trump's address to Congress.


It would be nice if they could cut to the chase instead of playing pretend Dostoyevski.


To be fair, the journalists put a lot of effort and money into this story. I think they should be allowed to tell the story as they see fit.

I'm sure the key points will be hashed and rehashed until many of the type of article you want are all over the internet.


Sure, but do they also want their story to be read by as many people as possible?


thanks for this comment, saved me alot of time, and gave me a nice chuckle. this form of article is becoming way to common lately


It is extra weird that the ones they are talking about in this Dostoyevskian intro, are the authors of the piece themselve.


People abuse Gonzo style journalism all the time these days. What they don't realize is that Hunter S Thompson was a) an inherently interesting character and b) his character was half-bullshit most of the time to make the story more interesting.

Journalists keep injecting themselves into their stories without being either interesting or contribute in any way (other than to show off their narrative and descriptive writing skills).

I hope it's just a short term trend or due to journalism budget cuts.


I don't mind the style. Works for those who have some downtime at work. But you should definitely include a summary for the rest of us.


”Tax payers have lost up to €2 billion, that’s nearly €350,000 for every Danish man, woman and child.”

You sure about that math, cumex-files?


Danish tax payers have lost around EUR 1.7B. That's around EUR 300 for every Dane. Still a lot, but a lot less than they claim.

I have two takes on this: 1: The Danish tax authorities have been extremely careless in the administration of the rules. They didn't even check that the people owned the shares they claimed to own. Virtually all of it was approved by one employee with zero oversight. 2: Different international banks have either known what was happening, and willingly enabled it, or should have known. Money laundry rules oblige them to check when such giant sums flow in and out of such few accounts.


The Danish tax disaster has a long history beginning in the early 00's when it was decided to reform and digitalize the tax collection. Contractors were brought in to develop a nation-wide tax collection system that would reduce the cost of collecting tax. This system was to take many years to develop and a plan was made to gradually lay off employees in the tax collection agency as the system was made ready so that there would not be a massive excess of employees when the system was released.

Of course the system was delayed.. by years... And there were fewer experienced employees available because the lay-off policy was to let people retire as normal, but just stop hiring.

When the system finally was released, the tax collection service was in dire straits. Layoffs had continued, experience was lost. Employees were doing the work of 3 people without really knowing how and having noone to ask for advice. To top it off, it was politically decided to decentralise the tax collection service and split the offices into many small units across the country. Causing even more people to quit.

This isn't the end though. The system was released all right, but it was quickly discovered that it was making illegal tax collections from citizens due to faulty property evaluation. Attempts were made to fix the system, but it was SCRAPPED AFTER TWO YEARS.

Now we are left with a broken tax collection agency which cannot perform its duties and lacks manpower to verify tax claims from companies knowingly exploiting the situation.


The worst thing is that our politicians seems to be mostly inclined to say they are disappointed whenever a new scandal erupts, and then nothing happens. If only they would have been as forceful in response as the new Social Agency scandal (even if 15+ years too late), when it came to the Tax Agency.

Then again, since it seems like most voters don't really give a damn, I guess it's politically expedient to just not care.


If your politicians are anything like mine, chances are they’re exploiting the system themselves.


In this case it's less politicians exploiting the system themselves and more due to both sides of parliament having been part of the process. If either side criticized the other it would come right back to them.


I vaguely recall Holland went through a similar process and is facing similar problems. Could the Dutchies in the know here on HN shed some light on this?


Our tax agency offered a really good package to people who voluntarily left the organization, sometimes over €100.000 euro. the idea was to lose around 4500 people in 7 years this way, but the package was so attractive about 6500 people immediately took it.

The entire idea was really not implemented well and now the tax agency needs like 4000 new people to replace the ones they didn’t want to lose. Lots of senior knowledge is gone and the entire agency is struggling doing its main tasks, resulting in hundreds of millions of missed taxes.


> They didn't even check that the people owned the shares they claimed to own

Yes. But people hates bureaucracy.

A common answer is'why do I need to present another document in the tax office?'

At least now Danish citizens have an answer. 'to avoid losing 1.7B'

bureaucracy is a remedy to a problem. It can be done right or wrong, but it's not bad by itself.


They should have the companies themselves submit their share register as of the in-dividend date to the tax authority (which the company has to know anyway, since you can be damn sure that they're not paying dividends to people who didn't own the shares!). No register no refunds.


Possibly confusion by someone who's used to the long scale? In Danish, as in most non-English European languages, the cognate of "billion" means trillion (10^12).


As it did in British English until, I guess, some time in the 80s or 90s after the Treasury decided to standardise on the US format (edit: apparently that was in 1975).

Like with metrication us Brits adopted it slowly so there were many years of seeing either usage. This wasn't confusing at all. :)


I think there is a mathematical definition and a financial definition of a "billion".


In the US, there is only one meaning for billion. Thousands (10^3), millions (10^6), billions (10^9), trillions (10^12), quadrillions (10^15), etc. And 99% of people would have never heard of milliard or billiard or any other -ard.


No cue sports in the US?


Hah, I meant in the context of numbers.


In Sweden there's miljon ^6, miljard ^9, biljon ^12, biljard ^15 (also means pool table) and triljon ^18. I once had to ask if "milj" meant miljon or miljard and they refused to answer and said I should look it up in a dictionary. This was a government contract.


Afrikaans also uses the long system.

"miljoen" -> "miljard" -> "biljoen" -> "biljard" -> "triljoen"

^6 -> ^9 -> ^12 -> ^15 -> ^18

However, a lot of Afrikaans-speaking people use the de facto English convention. The newspapers usually get it right though, in contrast to this article.


> in most non-English European languages

i dont think that's true


https://en.wikipedia.org/wiki/Long_and_short_scales#Long_sca...

The UK is the only place in Europe where "billion" means 10^9; in Eastern European languages, there simply isn't an equivalent word, and everywhere else it means 10^12.


An equivalent word for what? Poland is an EE language and has milion, miliard, bilion, biliard, etc.


in romanian it's like in French: million = milion, billion = miliard


> i dont think that's true

Here is a handy list:

https://en.wikipedia.org/wiki/Long_and_short_scales#Long_sca...


weird. Greek is short, not "other"


The Greek system parallels the short scale, but the terms themselves are derived from the myriad system; δισεκατομμύριο disekatommýrio, 10^9, literally reads twice-hundred-myriad.



Can confirm it's true for French and German: Million 10^6 Milliard(e) 10^9 Billion 10^12 Billiard(e) 10^15


From observing this story in the danish media, there is a lot of fishiness about it.

The numbers are just too big for it to make sense. And I would not be surprised to see some of it coming down to the lack of math skills (or what you call it?) amongst journalists. How can anyone arrive at a result like that and not look one more time at their calculation?

Embarrassing really.

With all the fuzz about Sanjay (the alleged perpetrator) why hasn’t the danish police issued an international arrest order for him? Regardless if he is sitting in Dubai.


That embarrassing error of a factor 1000 aside, the story is all to real. It's been brewing and been reported on in Germany for a few years now.

And what seems to be a common theme is that some of what has been going on is very hard to prosecute. The first wave of tricks seems to have been basically legal if I recall correctly. I haven't read the new slew of articles about the EU dimension on this yet though.


I have no doubt that there are elements of the story that are correct. But the shocking part of the story is the size of the amounts and the poor reporting by what should be an ace journalistic team coupled with common sense makes me doubt that the scale is correct.

Plus the recent the story that Sanjay was put in jail due to a rubber check. Doesn’t sound like a guy who just got away with 1 B euros.


The quote in the English text is:

"In Denmark, journalists and the authorities are also investigating the cum-ex trades. Tax payers have lost up to €2 billion * , that’s nearly €350 for every Danish man, woman and child."

That's correct - mathwise.

*: https://translate.google.com/#en/de/billion


Yes, looks like they have now corrected the article.


Just arrived to make the exact same comment.

Overstated a 1000 times, which suggests they are mistaking the new US-style billion of 1000 million for the old form of a billion (i.e. a million million).


I think the different 'billions' are called long and short scales.[0]

[0] https://en.wikipedia.org/wiki/Long_and_short_scales


Yeah, due to a very poor birthrate, the Danish population is currently at an all time low of ~5700 souls.


What? Denmark is a small town of 5,700 people, isn't it?

edit: Then I got curious about what size a 'town' is, which led me to https://en.wikipedia.org/wiki/Settlement_hierarchy which gave me the word 'Ecumenopolis' for a planet-wide city.


https://en.wikipedia.org/wiki/Decimal_separator

The decimal separator in most european countries is the comma. $350,000 in Denmark equals to $350. If there is an error by a factor of x1000 I would assume that is a case of meaning lost in translation and not intentional. The use of a third decimal is uncommon and unfortunate in any case.


They wouldn't use three trailing zeros. More likely is that they interpreted 1B as a million million, like the British do, instead of 1000 million.


Maybe a translator thought that it was an error and 'fixed it' adding the extra zero...


Billion means “1000 million” in British English, not “million million” (which is Trillion).


Did they change it?


Yes, many decades ago. The modern “short scale” billion Is found in UK technical documents and papers beginning in the 1950s, and used in official UK statistics since 1974.

https://en.m.wikipedia.org/wiki/Billion


57.000.0000.000€ is not so much for a tax-evading scheme in the whole of Europe? Or is it...


It’s not tax evasion. It’s receiving tax refunds from taxes that never were paid. This time it actually is pure theft.


Yes, sorry. My bad. This is much worse... what a shame.


Something is rotten in the state of Denmark...


Only off my a 1000x


The German government did know about this stuff I think from 2002 or 2001 on, but still did not stop it until around 2012 in Germany and did not warn other countries, so it went on in those.

I just can not understand, how the government of my country could work this way. It really borders to actively supporting this scam.

In my opinion, not only the people that have done this (including many banks!), but also responsible persons in the government or ministries should take responsibilities.

But in Germany, if you are big enough or in government, you can do nearly everything without effects.

Banks already have looted the people of many countries in 2008/2009.


> But in Germany, if you are big enough or in government, you can do nearly everything without effects.

While I sadly agree, I would like to point out that this is true of many countries.


I wanted to speak only for my own country, while I sadly think, I must agree.


[flagged]


Please don't do this here.


This reminds me of the way most application developers aren't security experts, and it's taken decades with a lot of very public hacks for awareness about the risks to be spread and for a set of security practices and middleware to evolve (hashed & salted passwords, CSRF mitigation, input sanitation, etc.), to make it feasible for normal developers to create reasonably secure applications. It seems something similar needs to happen in tax administration (and tax law) to make tax systems that are not exploitable. Maybe a new class of white-hats to "pen-test" the tax systems using loopholes and shell companies instead of 0-days and scanners?


The issue is that the tax system is a political/economic construct - so loopholes will take a very long time to be fixed. In the meantime, the white hat tax researchers have shown everyone else how to game the system.


if you are going to be opening law to competition-based evolution, you are opening the can of worms of "alternative government systems" , which is not acceptable by the elite groups that run the world.


There's a previous discussion for a NY Times article here: https://news.ycombinator.com/item?id=18149831


That NYT article was a lot better for understanding what was happening. I recommend it over the website here, even though it looks at Denmark instead of the whole EU.


Great journalism by FollowTheMoney.( with 12 other countries) Journalism the way it should be. Independent journalism payed by sponsors. https://www.ftm.nl/ , if you are dutch, you should sponsor them to.


Yikes, that site needs an epilepsy warning. :(


I'm sorry, but what an unfortunate name.


Knowing bankers’ humour, it’s probably anything but.



TL;DR In the old days when space on paper was a limitation, journalism was about squeezing essence of the story in as few words as possible. Instead they have come up with some sort of graphical novel.


This article is very hard to follow to figure out what has actually happened or what CumEx is.

In the beginning of the article is a rough description of the trade in question:

> Cum-ex – this is the name German media have given to this scam. Internationally the different variants of these trades are known as dividend arbitrage.

> Cum-ex and its variant cum-cum were highly complex share deals with no economic purpose other than to receive tax ‘reimbursements’ from the state – but for tax that had never in fact been paid. This is how it went. The participants would lend each other shares of major corporations, creating the appearance for the tax authorities that there were two owners of the shares when in fact there was only one. The bank which settled the trades would then issue a ‘confirmation’ to the investor that tax on dividend payment had been paid to the tax office – when in fact it had not. With this confirmation in hand, the investors were then ‘reimbursed’ by the state. It’s a bit like parents claiming child benefit for two – or more – children when there is only one child in the family.

Late in the article we get a description of the origin of the trade:

> The money machine

> According to Frey, an equity trader at a US investment bank came across the trade accidentally. He had bought shares that were delivered four days later. This interval covered the dividend payment day of the company whose shares he had purchased. This profit is taxed in the domicile of the company (say, Germany). German shareholders can ask for this tax to be reimbursed because they have already paid corporation tax.

> The trader suddenly realised he had this tax payable in his book without actually owning the shares. The amount was £50 million. It was a very large trade.

> The trader wanted to get rid of these funds that were not his. He approached the seller of the shares who had also been reimbursed his tax. The bank’s legal department sought professional tax advice to find out how to return the money to the tax office. The answer came back: “You can keep it.”

> There is no law that prohibits a multiple tax payout, they said. And if something is not explicitly prohibited, it is legal, the tax advisors argued. The trader kept the money. And because the tax reimbursement happened automatically, the scheme could be repeated time and again.

> All you needed was enough funds to trade the shares for a few days around dividend payment date. Or you could even just borrow the shares.

Following "dividend arbitrage", there are a couple of other articles that talk about it, Bloomberg [1] and ProPublica [2], though it's hard to tell if they're talking about the same thing or an older version of the scheme. In Denmark, where there is the most evidence of reimbursement for unpaid taxes, it looks like the investigations date to 2015 [3].

[1] https://www.bloomberg.com/news/articles/2018-05-18/denmark-t...

[2] https://www.propublica.org/article/denmark-is-big-victim-of-...

[3] https://www.thelocal.dk/20150925/danish-tax-authority-cleans...


Thank you very much for this. This should be the opening of the article. I don't know why articles start like novels. With so much information being published nowadays, I would think the start of the article would include a summary/abstract to help the reader decide to dedicate the time to read the entire article.


The website could not be worse for mobile. There’s a bar at the top, at the bottom, the address bar won’t collapse, and to top it all off you can’t use reader mode to fix it.


Is something like this also going on in the US? US tax laws are probably just as complicated as European ones.


So, they wrote "UBS drive"... is that a typo of USB, or did they get a leak from that bank?


tl;dr; People asked for task refund on tax they didn't pay.


TLDR

(saved for later reading)

In my understanding of reality, it's "business as usual".


European taxpayers have been swindled of much more at the moment they paid their taxes. Who will later steal it once more from the thieves isn't really that interesting.


Compliance are for small-medium Business & for common people; once a Business or a person grows too big to fail, paying the fines or bribing the legislators is the common route in most parts of the world.

I've anguished over this for years and have learned to accept it, depending upon where you live; this comment might sound entirely absurd.


If GDPR killed a startup it probably wasn't something worth keeping. Being compliant is sooo easy for small companies, it's mostly just about not being a dick about privacy.

And I have no idea why you thought bringing this up was relevant.


Statistics show a strong correlation between personal wealth and conviction rate for those accused of serious crimes.


The missing transparancy disclaimer: "The Cumex files" is headed by "Correctiv", a german based "journalist network" which receives large parts of its funding by german goverment organizations and/or organizations which have close gov connections. But: the german goverment itself was aware of this scheme since at least 2002.

Also: this is a drop in the ocean compared to EU-internal tax loop holes and tax havens such as Luxembourg.


A disclaimer implies there is something to disclaim, such as a financial conflict of interest - what reason for a disclaimer are you imagining?

Besides, they literally have a link to a page with detailed financial information, including every organization that gave them more than 1000 EUR to them.

Most of their funding in 2017 came from private parties not affiliated with any government. I can't find any numbers for 2018, which is a shame.

https://correctiv.org/en/about-us/


The article may for example be intentionally be silent on inefficiency/misbehavior of tax authorities.


Your conspiracy seems rather incompetent if they chose to use their money to silence their critics on some aspects, considering they financed that very investigation in the first place.


The list of donors can be found here, broken down by year: https://correctiv.org/ueber-uns/ This years biggest sponsor is by far the Omidyar Network Foundation (eBay Founder) with 640.051,24 Euro, followed by the Brost Foundation and Schöpflin Foundation with about 200.000 EUR each. The Bundeszentrale für politische Bildung gives 20.390 Euro. Last years breakdown looks slightly different, but private foundations cover the lions share of the costs.


"EU-internal tax loop holes" such as the well known tax reductions on patent/copyright/design/etc royalties, which are still 0% in the Netherlands:

https://en.wikipedia.org/wiki/Dutch_Sandwich




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