Financial institutions to maintain account records for an additional decade in the ongoing fight against tax evasion
The Federal Finance Minister, Lars Klingbeil, has announced a significant move to enhance the effectiveness of combating tax evasion, particularly in relation to complex schemes like CumEx and CumCum transactions. The decision comes after the traffic light coalition (SPD, Greens, and FDP) reversed a previous decision on bureaucratic reduction due to the implications of CumCum cases.
In a statement, Klingbeil mentioned that it's a matter of justice to crack down on those who enrich themselves at the expense of society. He emphasised that the extended retention of bookkeeping records would significantly impact the detection and prosecution of these tax evasion schemes.
CumEx transactions, a method of exploiting dividend tax loopholes, can result in substantial financial losses for governments. By claiming multiple refunds on a single dividend payout, these schemes effectively drain public funds through illegitimate tax refunds. The extended retention period for bookkeeping records will give regulators better access to transaction histories, enabling them to more effectively identify and disrupt such illicit practices.
CumEx trading involves rapid share transactions near dividend payout dates, often involving short selling and multiple tax refund claims on the same dividend tax. CumCum stock transactions, another form of tax evasion, refer to a method where investors claimed capital gains tax on dividend payments multiple times. These schemes can be intricate, making it hard to detect without adequate documentation.
The cabinet approved the plan, which means banks, insurers, and securities firms will now have to retain booking records for ten years instead of eight. This extended retention period will aid tax authorities in pursuing long-term recovery of losses and deterring future tax evasion through similar schemes.
While the judiciary is still at the beginning of CumCum investigations, some CumEx cases have been partially processed in court. Estimates suggest that the state suffered damages of 28.5 billion euros from CumCum stock transactions by 2021.
The non-governmental organization Finanzwende had warned for months about severe side effects of the reduction. However, the federal government is now reversing a part of the bureaucratic reduction set to take effect in early 2025.
This move by the federal government reflects a commitment to combating tax evasion, a key focus of Klingbeil's work. The traffic light coalition had initially decided on the bureaucratic reduction, but the implications of CumCum cases have led to a reconsideration of this decision.
The eight-year retention period for booking records remains in effect for other taxpayers. This extension for specific sectors is a strategic move to tackle the unique challenges posed by complex tax evasion schemes like CumEx and CumCum transactions.
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- The Federal Finance Minister, Lars Klingbeil, has announced an extension in the retention period for booking records from eight to ten years, a move that is part of the community and employment policy aimed at combating tax evasion schemes like CumEx and CumCum transactions, which can lead to substantial financial losses for governments.
- This decision, made in response to the complexities of CumCum cases, shows a shift in business, politics, and general-news, with a focus on finance, as the federal government moves towards pursuing those who enrich themselves at the expense of society and recovery of losses through longer retention of bookkeeping records.
