On the 18th of March this year a German court convicted two former London-based investment bankers for their involvement in a criminal tax fraud that has “left treasuries across Europe tens of billions of euros out of pocket.”
Then in June, the same Court published an anonymised 299-page version of its decision in which it can be seen that one of the defendants was ordered to pay €14m, representing “benefits derived from the relevant transactions.”
Of course, this is a mere pittance compared to the actual sums of tax that was stolen; an almost unbelievable €55 billion.
Before you ask, neither of the two men will ever see the inside of a jail cell because they both comprehensively ‘co-operated’ with the authorities.
As Sebastian Adam at the European Tax Blog put it:
“In return for their statements and their incrimination of other persons, they were given lenient sentences.”
Lenient is one way to describe the 1-year suspended sentences. Derisory might be another.
The incrimination of other persons by the two men has meant that in Germany alone about 900 people are being investigated, which “is expected to lead to a large number of prosecutions not only in Germany but also elsewhere in Europe, including the UK.”
That’s a boatload of financial types sweating through their tailored suits. No harm says you given what’s at stake.
To put the eye-watering theft of €55 billion in perspective, the helpful folks over The Conversation provided the following comparisons:
“The world’s most successful diamond thieves, the “Pink Panther” group, are suspected of heisting jewels worth €334 million (about $544 million). The largest bank job in history, a “cash withdrawal” from the Central Bank of Iraq by Saddam Hussein, is estimated to have been worth US$1 billion. The biggest ponzi scheme in history, by Bernie Madoff, defrauded investors of about US$20 billion. So, a €55 billion fraud is a very big deal.”
Something of an understatement wouldn’t you say.
The scam itself involves a labyrinthine and highly convoluted series of maneuverers involving (warning-financial jargon ahead) “trading and lending of securities and derivatives which were constructed around the dividend date (trading with (cum) and settlement without (ex) dividend entitlement) with the intention of generating multiple refunds of German withholding tax that had only been paid once.”
If that’s not clear, and there is no reason why it should be, then here is another helpful way of understanding what has taken place:
“It’s a bit like parents claiming a child benefit for two – or more – children when there is only one child in the family.”
One of the interesting, if not totally unsurprising aspects of this whole scandal, or “the biggest tax swindle in the history of Europe ” is how little most people will have heard of it.
I know Tony Connolly, RTE’s Europe Correspondent has had Brexit, Covid and interviewing Phil Hogan to be getting on with, but you would think he might have found time to give this issue a mention.
In fact, I have yet to find a single report on this issue from RTÉ at all. If it has reported on it, then I am happy to stand corrected.
As Sebastian Adam has further observed, “now that the Bonn Court has affirmed the accusation of tax evasion, further charges and convictions are likely follow.”
It is both infuriating and depressing to think that this is something that would never happen in this state given our record on convicting bankers and investors who play fast and loose with other people’s money.