Where in the World Is Denmark’s $2B?
nytimes.com
nytimes.com
Your pnl is simply this: you lost $7 on the stock but received $10 dividend. If you, like everyone else in that market, pay 30% tax on dividend - you are exactly breakeaven like everyone else. No arbitrage. Here for simplicity we assume you can’t tax-deduct loss on your stock position (that does not change anything).
However: if you somehow do not have to pay tax on dividend, or pay it at a reduced rate, you feel happy.
This could get tremendously complicated with cross-boarder transactions and international tax law. But nevertheless may be entirely legal, although understandably frowned upon. It could also be totally fraudulent depending on the setup. No idea what this guy was doing but the fact that he has not been criminally charged may be a hint that they actually cannot charge him with anything.
Soon after, an order was placed by another of the 27 plans to buy the order for the shorted shares. That open buy order — essentially, a promise to purchase shares that the other plan still didn’t own — was proof enough for SKAT to approve a refund. Once the refund was issued, the buy order was canceled.
So they weren't actually buying the shares at all, or receiving the dividend.
As for this claim that the guy makes, that he's just exploited a loophole, none of the guys I know in this niche believe that. There are also plenty of rumours surrounding his character, in the sense of "is he an honest guy", along with stories about how he might be lacking in the scruples department. None of which is hard evidence, of course.
Apparently, 9/11 is relevant here, because the bank through which it was financed just stopped paying the fine a few years ago. It was a pretty big sum. The bank was guilty of not policing its clients well enough.
One way in which a lot of terrorism is financed relatively safely is simply by switching banks, because banks don't have an adequate data-exchange mechanism. So for example, you fool one bank that the money being sent from Saudi Arabia to UK is an uncle sending money to a niece studying abroad. That looks normal. But then that money is sent from the niece to some third person, which might be suspicious. But if that third person uses a different bank than the niece, then this third person's bank will actually have no idea that one bounce ago the money was in Saudi Arabia. If the bank where the money first landed in UK didn't react, the money was moved successfully. I.e. the chances of it being traced back to Saudi Arabia are slim. Add a few more hops through different banks and tracing theses transactions becomes a nightmare.
This mess has two reasons, as far as I can tell. One is that there isn't a good way for banks to exchange data. They pretty much have to call the other bank and ask. The other reason is that they're policing themselves. Why do we have a decentralised money police?
That last question sort of leads me to my last point. This person I know confided that the distressing part of the job is that often you're helping put people in jail for dabbling in small crime (think selling some weed), but you're instructed to not pursue the big clients. In my friend's words, that's because the bank makes money off of the big clients, but the small ones are numerous, therefore expendable. They have to be able to demonstrate that they are thwarting money laundering and terrorism financing, meanwhile the big money crimes slip by unnoticed. So for the bank it's advantageous to do the policing themselves, because then they can discriminate.
Where did this idea come from? cum is Latin for "with". ex is Latin for "out of" or "from" (as in "exit"). sine is Latin for "without".
Compare the Spanish for "with" and "without", con and sin.
...and somehow, this article talks constantly about cum-ex trades without ever bothering to explain what they are. https://en.wikipedia.org/wiki/Dividend_stripping
1. There was a pool of retirement accounts that traded with each other.
2. In an example of the scam, one of these accounts would place an order to sell Danish stocks short, presumably cum-dividend.
3. Another account would respond by placing an order to buy the same stocks. This order never went through, presumably because it was placed at a lower price point.
4. The "buy" account would get its dividend taxes spuriously refunded and then cancel the buy order. The "sell" account would cancel its sell order.
I don't see what the role of the "sell" account is. It looks to me like you could do exactly the same thing with just the "buy" account.
https://www.reuters.com/article/germany-dividends/dividend-t...
In this case, though, it involved a bank that owned the shares: The bank would loan the shares to a shorter, the shorter would sell them to a buyer, and both the bank and the buyer would collect the dividend refund.
I wonder if there's some detail the NYT author missed in terms of double ownership that would make the short sale make more sense.
Under US law, a dividend paid to you by a borrower is taxable as ordinary income, not as a qualified dividend -- usually the borrower (short seller) will pay a premium on the interest to reflect the difference in effective tax rates.
I don't know the rules for Denmark, but it seems that having a withholding requirement on the dividend payer ads to complexity, because it requires a refund process. It might be better to have simply required reporting of the income, and maybe required withholding by brokerages.
In other words, make it more profitable to tell the government what to look for instead of taking advantage of it yourself.
It was made possible because the audit of every vat refund was just one guy, and that was ridiculous, but those 120 billion still exited our treasury.
It's kind of easy to prove wrong doing on vat, if your company hasn't registered a single transaction, then your company simply isn't owed any vat. Yet the article seems to want to make this complicated...
Why is that?
It’s the tax you pay when you trade any product.
I might not be very smart, I'm having a hard time understanding how this scheme was accomplished. What worries me is how invisible this is, and how much harm it does. I really wonder how much fraud of this scale is not being caught, because most people don't really understand what is being done, on top of it happening in ways which are hard to grasp.
It really reminds me how big multinationals have committed tax avoidance for decades, but the voters cannot see it, don't understand how it hurts them, and are never really protesting it.
There are laws and a justice system, but to me it's really hilarious that those people are getting away with this, and how loopholes are tolerated and not an abuse of the law. I cannot understand how the world can just look away and not try to fix this. I fear that if this keeps happening, it may be a source of instability and would really undermine political stability. How would you make a country work properly is the state budget is shrinking?
Funny because the first thing I think of is government incompetence and stupidity.
A hole in a system a billion dollars wide will always be taken advantage of in whatever kind of economic system, i.e. this is not 'capitalism' just 'quasi legal hacking'.
That's a pretty big hole and I wonder how many people will lose their jobs over it? One? More? Any?
I like fair regulatory systems, especially those easier to watch ... but this isn't that.
This is enough of an embarrassment that the government should be brought down over it. That's just an quite amount of money to lose for a small country. $2B buys a lot of services for a country the size of a city.