It’s one of the biggest tax scandals since World War II: Investigators say unwarranted tax refunds from so-called dividend-stripping have deprived the state of billions of euros over the years.
Rough estimates put the damage at €12 billion. Some believe it’s far more than that.
Now, a German parliamentary committee will launch an enquiry into the controversial practice.
Dividend-stripping involves buying shares – sometimes worth billions of euros – just before a company pays out dividends to shareholders, and then selling them again shortly after. By carrying out these transactions with borrowed money – short-selling – the customers are able to sell the shares at a loss without losing any actual money. The “loss” allows them to claim multiple tax exemptions, ultimately lowering the taxes they have to pay on their overall capital gains revenues.
The parliamentary committee, set up last week on the initiative of the opposition Greens and Left Party, will start work Thursday to find out how the refunds were possible.
Part of the reason is already known: The government neglected to forbid the practice for many years. The law wasn’t changed until 2012 to make it illegal.
Investigations by prosecutors and tax authorities have concluded that many bankers and tax advisors evaded tax and systematically defrauded the state. A number of investigations are underway. Some have been going on for years. It remains unclear if any criminal charges will be filed.