P8_TA(2018)0475

The Cum Ex Scandal: financial crime and the loopholes in the current legal framework

European Parliament resolution of 29 November 2018 on the cum-ex scandal: financial crime and loopholes in the current legal framework (2018/2900(RSP))

(2020/C 363/15)

The European Parliament,

— having regard to the cum-ex revelations made by a consortium of investigative journalists led by the German non-profit media organisation CORRECTIV on 18 October 2018,

— having regard to Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (1) (‘ESMA Regulation’),

— having regard to Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (2) (‘EBA Regulation’),

— having regard to Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC2) (3),

— heaving regard to Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6) (4),

— having regard to the Fourth Inquiry Committee of the German Bundestag regarding the scandal, which culminated in a report (5) in June 2017,

— having regard to its resolutions of 25 November 2015 (6) and 6 July 2016 (7) on tax rulings and other measures similar in nature or effect,

— having regard to its resolution of 16 December 2015 with recommendations to the Commission on bringing transparency, coordination and convergence to corporate tax policies in the Union (8),

— having regard to its recommendation of 13 December 2017 to the Council and the Commission following the inquiry into money laundering, tax avoidance and tax evasion (9),

— having regard to its decision of 1 March 2018 on setting up a special committee on financial crimes, tax evasion and tax avoidance (TAX3), and defining its responsibilities, numerical strength and term of office (10),

— having regard to its plenary debate of 23 October 2018 on the cum-ex scandal,

— having regard to its joint ECON/TAX3 committee meeting of 26 November 2018,

— having regard to Rule 123(2) of its Rules of Procedure,

A. whereas ‘cum-ex’ and ‘cum-cum’ — or dividend arbitrage trading schemes — refer to the practice of trading shares in such a way as to conceal the identity of the actual owner and to enable both or multiple parties involved to claim withholding tax refunds on capital gains tax that had only been paid once;

B. whereas the cum-ex scandal was revealed to the public through a collaborative investigation between 19 European news media outlets involving 12 countries and 38 reporters;

C. whereas it is reported that 11 Member States have lost up to EUR 55,2 billion in tax revenue as a result of cum-ex and cum-cum schemes;

D. whereas it is nonetheless difficult to calculate the maximum amount of the damage incurred, given that many actions started in the late 1990s and have long since been time-barred;

E. whereas the investigation by the consortium of European journalists identifies Germany, Denmark, Spain, Italy and France as allegedly the main target markets for cum-ex trading practices, followed by Norway, Finland, Poland, Denmark, the Netherlands, Austria and the Czech Republic, and whereas these practices potentially involve an unknown number of EU Member States as well as countries of the European Free Trade Association (Switzerland, for example);

F. whereas investigations in the most affected EU Member States are ongoing;

G. whereas cum-ex and cum-cum schemes bear some of the hallmarks of tax fraud, and it needs to be assessed whether there has been a breach of either national or EU law;

H. whereas it has been reported that these criminal practices involve EU Member States’ financial institutions, including several large well-known commercial banks;

I. whereas in some cases relevant authorities did not conduct in-depth investigations into the information shared from other Member States regarding the cum-ex revelations;

J. whereas the fact that foreign investors are entitled to claim a refund of the withholding taxes on dividends plays a central part in the revelations;

K. whereas as of September 2017, the second Directive on Administrative Cooperation (DAC2) requires EU Member States to obtain information from their financial institutions and to exchange it with the Member State of residence of taxpayers on an annual basis;

L. whereas the sixth Directive on Administrative Cooperation (DAC6) requires any person that designs, markets, organises, makes available for implementation or manages the implementation of a reportable cross-border arrangement which meets pre-defined hallmarks to report those arrangements to national tax authorities;

M. whereas the mandate of the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) explicitly covers any relevant developments within the remit of the committee that emerge during its term;

N. whereas the role of whistle-blowers over the last 25 years has proven significant in revealing sensitive information that is at the centre of public interest, which has also proven to be the case in the cum-ex revelations (11);

1. Strongly condemns the revealed tax fraud and tax avoidance which has led to publicly reported losses of Member States’ tax revenue, amounting to as much as EUR 55,2 billion according to some media estimates, which are a blow to the European social market economy;

2. Highlights that, according to the EU Anti-Money Laundering Directive ( 12 ) , ‘tax crimes’ relating to direct and indirect taxes are included in the broad definition of ‘criminal activity’ and are considered predicate offences for money laundering; recalls that both credit and financial institutions, as well as tax advisers, accountants and lawyers, are considered ‘obliged entities’ under the Anti-Money Laundering Directive and are therefore bound to comply with a set of duties to prevent, detect and report money laundering activities;

3. Notes with concern that the cum-ex scandal has shaken citizens’ trust in tax systems and stresses how crucial it is to restore public confidence and ensure that any damage caused will not be repeated;

4. Deplores the fact that the Commissioner in charge of taxation does not recognise the need to extend the existing system for the exchange of information between national tax authorities;

5. Requests the European Securities and Markets Authority and the European Banking Authority to conduct an inquiry into dividend arbitrage trading schemes such as cum-ex or cum-cum in order to assess potential threats to the integrity of financial markets and to national budgets; to establish the nature and magnitude of actors in these schemes; to assess whether there were breaches of either national or Union law; to assess the actions taken by financial supervisors in Member States; and to make appropriate recommendations for reform and for action to the competent authorities concerned;

6. Underlines that the reported revelations do not affect the stability of the Union’s financial system;

7. Recommends that the inquiry establish what failed in the coordination and surveillance tasks of financial supervisors, stock exchanges and tax authorities across the Member States which allowed these tax theft schemes to continue for years despite having been identified;

8. Calls for national and European supervisory authorities to be given a mandate to look into tax avoidance practices, as they may pose a risk to the integrity of the internal market;

9. Underlines that these new revelations seem to indicate possible shortcomings in national taxation laws and in the current systems of exchange of information and cooperation between Member State authorities; calls on Member States to effectively implement the mandatory automatic exchange of information in the field of taxation;

10. Calls for information exchange to be strengthened at the level of tax authorities in order to prevent the issues with tax confidentiality that have been seen in some Member States;

11. Urges all Member States’ tax authorities to nominate Single Points of Contact (SPoCs) in line with the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration, and calls on the Commission to ensure and facilitate cooperation between them, with a view to making certain that information on cases with cross-border relevance is shared rapidly and efficiently between Member States;

12. Calls also on national competent authorities, where appropriate, to open criminal investigations, use legal tools to freeze suspicious assets, launch inquiries into the management boards potentially involved in this scandal and impose appropriate and dissuasive sanctions on the parties involved; takes the view that both perpetrators and enablers of these crimes, including not only tax advisers but also lawyers, accountants and banks, should be brought to justice; stresses the urgent need to end white-collar impunity and ensure better enforcement of financial regulations;

13. Calls on the EU and Member State authorities to investigate the role of insurance funds and insurance supervisors in the scandal;

14. Calls on national tax authorities to reap the full potential of DAC6 with regard to the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, including the use of group requests; calls, furthermore, for DAC6 to be strengthened in order to require the mandatory disclosure of dividend arbitrage schemes and all information on capital gains, including the granting of dividend and capital gains tax refunds;

15. Urges all Member States, identified as allegedly being the main target markets for dividend arbitrage trading practices, to thoroughly investigate and analyse dividend payment practices in their jurisdictions, to identify the loopholes in their tax laws that generate opportunities for exploitation by tax fraudsters and avoiders, to analyse any potential cross-border dimension of these practices and to put an end to all these harmful tax practices;

16. Stresses the need for coordinated action between national authorities in order to guarantee recovery of illegally obtained resources from public accounts;

17. Urges the Commission to assess and the Member States to review and update bilateral taxation agreements between Member States and with third countries to close loopholes that incentivise tax-driven trading practices with the purpose of tax avoidance;

18. Calls on the Commission to start working immediately on a proposal for a European financial police within the framework of Europol with its own investigatory capacities, as well as on a European framework for cross-border tax investigations;

19. Calls on the Commission to revise the directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States in order to tackle dividend arbitrage practices;

20. Calls on the Commission to assess the role of Special Purpose Vehicles (SPVs) and Special Purpose Entities (SPEs) revealed by the cum-ex papers and, where appropriate, to propose limiting the use of these instruments;

21. Appeals to the Commission to consider the need for a European framework for capital income taxation that reduces incentives that destabilise cross-border financial flows, generate fiscal competition among Member States and undermine tax bases that guarantee the sustainability of European welfare states;

22. Asks the Commission to consider a legislative proposal for an EU Financial Intelligence Unit, a European hub for joint investigative work and an early warning mechanism;

23. Notes the fact that the 2008 crisis has resulted in generalised resource and personnel reductions in tax administrations; calls on Member States to invest in and modernise the tools available to tax authorities, and to allocate adequate human resources so as to improve surveillance and reduce timing and informational gaps; calls on Member States to improve the capacities and capabilities of their financial authorities to ensure they are fully functional for detecting tax fraud;

24. Stresses the need for the protection of whistle-blowers who disclose information for example on tax fraud and tax evasion at national and EU level; invites anyone who has information of value for the public interest to report it, either internally, externally to the national authorities or where necessary to the public; calls for the proposal for a directive of the European Parliament and of the Council on protection of persons reporting on breaches of Union law to be swiftly adopted considering the opinions adopted in the different European Parliament committees;

25. Welcomes the Commission proposal of 12 September 2018 to amend, among other regulations, the regulation establishing the EBA in order to reinforce the role of the EBA in anti-money laundering supervision of the financial sector (COM(2018)0646); stresses that, in accordance with the Single Supervisory Mechanism, the ECB has the task of carrying out early intervention actions as laid down in relevant Union law; takes the view that the ECB should have a role in alerting competent national authorities and should coordinate any action regarding suspicions of non-compliance with anti-money laundering rules in supervised banks or groups;

26. Takes the view that the work of the TAXE, TAX2, PANA and TAX3 committees should be continued, in the forthcoming parliamentary term, in a permanent structure within Parliament such as a subcommittee to the Committee on Economic and Monetary Affairs (ECON);

27. Calls on the TAX3 Special Committee to conduct its own assessment of the cum-ex revelations and to include the results and any relevant recommendations in its final report;

28. Instructs its President to forward this resolution to the Council, the Commission, the European Banking Authority and the European Securities and Markets Authority.

(1) OJ L 331, 15.12.2010, p. 84.

(2) OJ L 331, 15.12.2010, p. 12.

(3) OJ L 359, 16.12.2014, p. 1.

(4) OJ L 139, 5.6.2018, p. 1.

(5) Deutscher Bundestag, Drucksache 18/12700, 20.6.2017.

(6) OJ C 366, 27.10.2017, p. 51.

(7) OJ C 101, 16.3.2018, p. 79.

(8) OJ C 399, 24.11.2017, p. 74.

(9) OJ C 369, 11.10.2018, p. 132.

(10) Texts adopted, P8_TA(2018)0048.

(11) European Parliament ECON/TAX3 Hearing of 26 November 2018, ‘Cum-ex scandal: financial crime and the loopholes in the current legal framework’.

(12) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, (ES) č. (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, OJ L 141, 5.6.2015, p. 73.