Handelsblatt Exclusive

Turning a Blind Eye

  • Why it matters

    Why it matters

    The German government is allowing banks to continue with questionable trades that shield foreign investors from paying capital gains taxes. It’s a scandal gaining national attention, and one that Germany’s center-left SPD party could make into an election issue next year.

  • Facts


    • In a decree dated November 18, tax authorities in the German state of Hesse, where the country’s financial capital Frankfurt is based, ordered auditors to end their investigations into banks involved in a form of dividend stripping.
    • The decree from Hesse followed the publication of a letter from the federal ministry of finance, which acknowledges that such deals are in principle illegal but allowed key exceptions.
    • The move has sparked outrage from ministers at a regional and national level, leading to calls for the finance ministry’s circular to be amended.
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“Supermond” über Frankfurt am Main
Frankfurt's banks may be getting a pass, but many other states aren't happy about it. Source: DPA

Thomas Schäfer made his feelings pretty clear when Commerzbank, Germany’s second largest bank, hit the headlines back in May for all the wrong reasons.

“In my opinion, these deals are purely a tax trick at the expense of society,” the finance minister of the German state of Hesse said.

He was talking about Commerzbank’s involvement in a form of dividend stripping that allowed foreign investors to escape paying capital gains taxes – a practice that reportedly costs Berlin hundreds of millions of euros a year.

And yet, today, it seems Commerzbank can relax. Fiscal authorities in Mr. Schäfer’s state have effectively granted the bank, and many other institutions that took part in such deals, a license to continue engaging in these controversial activities.

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