Margaux Fodéré, edited by Romain Rouillard
This Tuesday, searches took place in the premises of several major French banks. BNP Paribas, HSBC, Société Générale or even Natixis are suspected of having engaged in aggravated tax fraud laundering. At the heart of the suspicions: the practice of “CumCum” which has cost 33 billion euros in 20 years to the French State.
Several major French banking establishments are in the eye of the storm. Societe Generale, BNP Paribas or even Natixis and HSBC are suspected of laundering aggravated tax evasion and underwent searches within their premises this Tuesday noon. A large-scale operation which mobilized 16 magistrates from the national financial prosecutor’s office, 150 investigators from the judicial financial investigation service (SEJF), as well as six German prosecutors from the Cologne prosecutor’s office. At the heart of the investigations: the practice of “CumCum”, responsible for 33 billion euros in lost revenue for the French State over the past 20 years.
A “win-win” maneuver
To understand the ins and outs of this practice, imagine that an American owns shares in a company listed in France. Like all shareholders, he will receive dividends once a year. But as a foreign investor, he must pay a withholding tax which is between 15 and 30% of the dividend. However, to escape it, this American can decide to lend his shares to a French bank – which pays little or no tax – just before receiving these dividends.
Once their payment is complete, the bank can then return his shares to him and share with him the tax gain from the operation. A maneuver, baptized in Latin “CumCum”, implied “win-win” for the bank and the investor. But the game turns out to be dangerous because tax optimization can quickly turn into tax evasion. The investor then exposes himself to penalties from the tax authorities, or even to legal proceedings, just like the bank if the fraud is proven.
