The Tax Dodge That Cost the German Treasury Billions
Prosecutors say dozens of banks and brokerage houses helped investors create massive returns for nearly a decade.
The maneuver was brilliant, a virtually risk-free transaction that guaranteed hefty returns after only a few days. Then the taxman caught on.
For the better part of a decade, German authorities say, dozens of banks and brokerages helped investors snatch billions of euros from the national treasury by exploiting an interpretation of the tax code that appeared to let multiple people claim ownership of the same shares of stock and—crucially—the right to a refund of taxes withheld from dividends. “They seemed to be creating money from nothing,” says Tobias Rudolph, a criminal defense lawyer in Nuremberg. “Common sense should have told anyone that this couldn’t be right.”