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German state has lost EUR31.8 billion due to bank and broker schemes, says research

Monday, 12 June, 2017

International bankers and stockbrokers appear to have used unethical, and possibly illegal, practices to deprive the state of nearly EUR32 billion (GBP28 billion, USD36 billion) between 2001 and 2017. Research by Mannheim University professor Christoph Spengel, shared with Die Zeit and broadcaster ARD, describes extensive tax avoidance.

What were the activities?

The study claims that, in a number of cases, prosecutors, who have been investigating for some time, ignored individual, banking and business practices that should have been regarded as disreputable.

Two main types of activity are highlighted. First, in a legally questionable operation, German banks and stockbrokers bought and sold shares for foreign investors. They were then allowed to claim a tax refund to which they were not entitled. Second, exploiting a procedure outlawed in 2012 and allowing for more than one person or body to own a share at the same time, creative accounting could enable multiple tax refunds to be claimed.

State bailouts and whistleblowers made little difference

Some institutions being investigated by German prosecutors were bailed out by the state. According to the latest revelations, a warning from State Commissioner August Schäfer in 1992 and five whistleblower statements went unheeded. The practices, involving 40 German banks and numerous other financial institutions internationally, continued unchecked.

Sources

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