The European Securities and Markets Authority (ESMA) published on Tuesday 2 July its preliminary findings on multiple withholding tax reclaim schemes revealed by the 'CumEx Files' scandal, as requested by the European Parliament in a 2018 Resolution (see EUROPE 12149/3). It has decided to launch a formal inquiry to gather more information from the competent national authorities on how they monitor these schemes.
'CumEx' dividend arbitrage strategies allow, through rapid share transfers, to be reimbursed several times a tax paid only once. In the 'CumEx Files' case, European banks were able to evade tax on share dividends in excess of 55 billion euros over 15 years in 11 Member States.
The ESMA points out that it is not for it to classify or not such conduct as illegal or fraudulent, but only to rule on possible violations of EU law.
In this respect, the report notes that the implementation of these schemes does not necessarily imply a violation of the European Market Abuse Regulation or the MiFID II framework. However, the ESMA notes that there may be concerns about compliance with transaction reporting requirements.
"While these schemes do not necessarily imply breaches (…) they may affect the integrity of securities markets", ESMA President Steven Maijoor said in a statement.
For this reason, the ESMA has decided to launch a formal inquiry to gather further evidence from national authorities on potential threats to the integrity of European financial markets for these schemes. The authority also wishes to know whether the national authorities have found cases of violations of national or EU law, as well as the measures taken to monitor these schemes.
The ESMA will report to Parliament on the results of this inquiry. See the report: https://bit.ly/2Ly385J (Original version in French by Marion Fontana)