Cum-ex tax fraud revelations further ‘blotch’ on Ireland’s reputation

Irish funds involvement scheme has ‘serious implications’ for country’s reputation

Irish-based funds and banks were used by a group of hedge funds to carry out a financial fraud scheme

Irish-based funds and banks were used by a group of hedge funds to carry out a financial fraud scheme

 

Revelations that Ireland facilitated a financial fraud scheme that siphoned billions of euros from other European countries’ tax authorities was a further “blotch” on the country’s record, Sinn Féin has said.

Irish-based funds and banks were used by a group of hedge funds to carry out the scheme, which was based around claiming multiple refunds of dividend withholding tax that was paid only once, or in some cases not at all.

The scheme worked by buying and selling huge volumes of shares at key times around the date companies paid out dividends. The trades were structured in a co-ordinated circuit to create confusion as to who was owed a tax refund.

An investigation by The Irish Times, in partnership with German newsroom Correctiv and 15 other media organisations, reveals Ireland played a key role in facilitating the scheme.

Several of the figures involved set up funds in Ireland as vehicles to trade and claim tax refunds from larger EU countries, with Germany one of the main targets.

The collaboration of media outlets examined a huge leak of documents compiled by various authorities investigating the scheme, called the Cum-ex Files.

Mairéad Farrell, Sinn Féin spokeswoman for public expenditure, said Ireland had “incurred significant reputational damage” in recent years over financial scandals. “This is now another blotch on our record,” she said.

“This isn’t a victimless crime. These kinds of schemes contribute significantly to growing economic inequality, by starving states of badly needed tax revenues. They also undermine faith in the political and legal system, as often few are held accountable,” she said.

Ms Farrell said under the cum-ex scheme financial entities based in Ireland benefited “at a cost to other countries’ tax base”.

Cian O’Callaghan, Social Democrats TD, said details of Ireland’s involvement in the scheme had “serious implications for the international reputation” of the country.

“Given the pervasive culture of light-touch regulation operated in Ireland it is no accident that Irish-based funds ... were chosen to facilitate this fraud,” he said.

As other countries moved towards stronger standards for corporate and financial enforcement, Ireland was “again a laggard and not a leader,” he said.

Estimates from academics of how much was lost by European tax authorities due to cum-ex trades over the past 20 years, and similar schemes called cum-cum, range from €55 billion to €140 billion.

Paul Murphy, Rise-People Before Profit TD, said the Cum-ex Files investigation “unfortunately will cement Ireland’s reputation as the financial wild west”.

Minister of State with responsibility for financial services Seán Fleming, said recent years had seen transparency improvements in the Irish funds industry.

“Probably the issue of withholding tax in double taxation agreements needs to be monitored more closely” he told The Irish Times.

“Revenue or gardaí will provide any information required that is obtained here that will assist in any EU investigations or inquiry,” he said.

Mr Fleming said Revenue was “quite strong” as a tax authority, but he “didn’t know how good” authorities in other European countries were.

Irish Funds, the representative body for international investment funds, said it would condemn “any illegal activity and fully supports compliance with all relevant tax regulations.” A spokeswoman for the group said “if more international cooperation is needed, we support it”.

Michael D’Arcy, chief executive of Irish Association of Investment Managers lobby group, and former minister of State in the Department of Finance, similarly said such funds had “no place in the Irish ecosystem”.