This was the other big news of this Tuesday. While the demonstrations against the pension reform swarmed throughout France, several searches were underway on Tuesday in five French banking establishments in Paris and La Défense. The reason ? Suspicions of aggravated tax evasion, according to the National Financial Prosecutor’s Office (PNF), following a series of investigations opened at the end of 2021 on “CumCum”. Société Générale, BNP Paribas, Exane (a subsidiary of BNP), Natixis and HSBC are targeted, according to The world.
Unless you are a tax specialist, you have never heard of this famous “CumCum”. Do not panic, 20 minutes explains everything to you.
What is the “CumCum” of which the banks are accused?
The “CumCum” is a tax fraud based on dividends. According to the General Tax Code (CGI), dividends paid by a French company to a foreign client are subject to withholding tax. This percentage can range from 17.2% to 30% depending on the country, with residents of the European Union paying a lower share, informs Coraline Dedieu, lawyer at the Paris bar and tax specialist.
The idea of “CumCum” is then simple: arrange so that this percentage is not taken, in order to maximize profits. To do this, it is “sufficient” to temporarily transfer the securities held by the foreign client to his French bank, right before the payment of dividends. Dividends are paid, and since the bank is French, without this tax levy. “This saves huge sums of money, which can then be shared between the bank and its client, in a sort of super-dividend”, continues Coraline Dedieu.
The process would affect the whole of Europe, according to the “CumEx Files” survey conducted by several media in 2018. The loss of tax resources has been estimated at 140 billion euros over two decades.
Is the process legal?
“All of this is very abusive, recalls Coraline Dedieu. There is only one economic reason which justifies this round trip of shares between the client and his bank in a few days, in addition, right before the payment of dividends. »
But in law, economics does not excuse everything. “The tax administration brings out its ultimate arsenal: the abuse of rights, since it is abusive not to pay the planned tax with a process having this sole motivation”, develops the lawyer. In France, tax adjustments have therefore been decided from the end of 2021 by the Directorate General of Public Finance for sums counting in the tens, or even hundreds, of millions of euros.
What happened on Tuesday?
From the moment the sum of the adjustment exceeds 100,000 euros, “we automatically fall into the criminal law”, explains Coraline Dedieu. Hence the intervention of the PnF on Tuesday, in order to collect as much evidence and documents as possible.
“The offending banks risk convictions for tax evasion, money laundering of tax evasion, all in an organized gang… If it is true, it will be very heavy in terms of fines,” said the lawyer. And beyond the companies, “all the people who actively participated in this process can be declared criminally responsible, and therefore sentenced”.