Banks, investors and intermediaries cheated the Dutch treasury out of potentially €27bn in the period 2000 to 2020, according to an international investigation by research collective The CumEx Files.
The fraud is based on dividend payments made by companies and traders using what is known as cum-ex and cum-cum transactions – complicated ways of avoiding paying taxes by dividend stripping.
With cum-ex, dividends that have not even been paid are creamed off, or dividend tax is reclaimed multiple times when it has only been paid once. Cum-cum occurs when a shareholder has paid dividend tax, but is not entitled to a refund and so and trades that ‘right’ with another party who can claim a refund.
‘The [worldwide] damage could be even higher,’ said Christoph Spengel, an economics professor at the University of Mannheim who helped analyse the global trading data with his team.
The Dutch tax office told Dutch investigative website Follow the Money, which works with the collective, that it welcomed the efforts to gain more insight into the subject.
However, it pointed out, many foreign investors in the Netherlands are pension funds who are already exempt from dividend taxes.
Leiden University tax lawyer Jan van de Streek told FTM that Dutch legislation on dividend stripping is weak and that the tax office is faced with an impossible position in terms of gathering evidence for a prosecution.
‘It does not surprise me that the Netherlands has potentially missed out on a lot of dividend tax due to dividend stripping,’ he said. The Netherlands, he said, is home to a lot of multinational headquarters and therefore a lot of dividends. ‘And because we are a small country, the group of foreign shareholders is also large,’ he said.
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