IDEAS home Printed from https://ideas.repec.org/a/prf/journl/v15y2021i1p49-62.html
   My bibliography  Save this article

The Cum-ex Case: A Look at Germany

Author

Listed:
  • Bastian Schulz

    (University of Finance and Administration)

Abstract

This paper focuses on a particular form of stock-market trades around ex-dividend days, so-called “cum-ex” transactions, which have resulted in major revenue losses due to illegitimate tax refunds in Germany and other European nations. Until 2012, the loophole in the German withholding tax scheme made it possible for cum-ex traders to receive withholding-tax certificates without prior withholding-tax payment. Because a certain category of investors might use the tax certificates to gain a tax exemption, this opened up the prospect of a particular form of tax arbitration. It was not until 2018 that a cross-border investigation team called the Cum-Ex Files revealed the scandal to its full extend. This paper will mainly focus on the cum-ex scandal in Germany since the literature on the topic is very limited.

Suggested Citation

  • Bastian Schulz, 2021. "The Cum-ex Case: A Look at Germany," ACTA VSFS, University of Finance and Administration, vol. 15(1), pages 49-62.
    • Handle: RePEc:prf:journl:v:15:y:2021:i:1:p:49-62
    as

    Download full text from publisher

    File URL: https://www.vsfs.cz/periodika/acta-2021-1-03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lakonishok, Josef & Vermaelen, Theo, 1986. "Tax-induced trading around ex-dividend days," Journal of Financial Economics, Elsevier, vol. 16(3), pages 287-319, July.
    2. Karpoff, Jonathan M. & Walkling, Ralph A., 1990. "Dividend capture in NASDAQ stocks," Journal of Financial Economics, Elsevier, vol. 28(1-2), pages 39-65.
    3. Slemrod, Joel, 2008. "Does It Matter Who Writes the Check to the Government? The Economics of Tax Remittance," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 251-275, June.
    4. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
    5. Tyler R. Henry & Jennifer L. Koski, 2017. "Ex-Dividend Profitability and Institutional Trading Skill," Journal of Finance, American Finance Association, vol. 72(1), pages 461-494, February.
    6. Slemrod, Joel, and Christian Gillitzer, 2014. "Tax Systems," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026724, April.
    7. McDonald, Robert L, 2001. "Cross-Border Investing with Tax Arbitrage: The Case of German Dividend Tax Credits," The Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 617-657.
    8. Dan Dhaliwal & Oliver Zhen Li, 2006. "Investor Tax Heterogeneity and Ex‐Dividend Day Trading Volume," Journal of Finance, American Finance Association, vol. 61(1), pages 463-490, February.
    9. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, May.
    10. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, vol. 109(3), pages 640-660.
    11. Holzmann, Carolin & Scholz, Hendrik & Kreidl, Felix & Büttner, Thiess, 2017. "Stock Market Behavior on Ex-Dividend Dates: The Case of Cum-Ex Transactions in Germany," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168242, Verein für Socialpolitik / German Economic Association.
    12. Umid Akhmedov & Keith Jakob, 2010. "The Ex‐dividend Day: Action On and Off the Danish Exchange," The Financial Review, Eastern Finance Association, vol. 45(1), pages 83-103, February.
    13. Yaniv, Gideon, 1988. "Withholding and non-withheld tax evasion," Journal of Public Economics, Elsevier, vol. 35(2), pages 183-204, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thiess Buettner & Carolin Holzmann & Felix Kreidl & Hendrik Scholz, 2020. "Withholding-tax non-compliance: the case of cum-ex stock-market transactions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(6), pages 1425-1452, December.
    2. Miguel Almunia & David Lopez-Rodriguez, 2014. "Heterogeneous Responses to Effective Tax Enforcement: Evidence from Spanish Firms," Working Papers 1412, Oxford University Centre for Business Taxation.
    3. Felix Kreidl, 2020. "Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend," IJFS, MDPI, vol. 8(3), pages 1-21, September.
    4. Paudel, Shishir & Silveri, Sabatino (Dino) & Wu, Mark, 2022. "Investor sentiment and asset prices: Evidence from the ex-day," Journal of Banking & Finance, Elsevier, vol. 139(C).
    5. Marie Bjørneby & Annette Alstadsæter & Kjetil Telle, 2018. "Collusive tax evasion by employers and employees. Evidence from a randomized fi eld experiment in Norway," Discussion Papers 891, Statistics Norway, Research Department.
    6. Aelee Jun & V. T. Alaganar & Graham Partington & Max Stevenson, 2008. "Price and Volume Behavior around the Ex‐dividend Day: Evidence on the Value of Dividends from American Depositary Receipts and their Underlying Australian Stocks," International Review of Finance, International Review of Finance Ltd., vol. 8(1‐2), pages 21-55, March.
    7. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    8. Chen, Shawn Xiaoguang, 2017. "The effect of a fiscal squeeze on tax enforcement: Evidence from a natural experiment in China," Journal of Public Economics, Elsevier, vol. 147(C), pages 62-76.
    9. Castillo, Augusto & Jakob, Keith, 2006. "The Chilean ex-dividend day," Global Finance Journal, Elsevier, vol. 17(1), pages 105-118, September.
    10. Dixon, Peter N. & Fox, Corbin A. & Kelley, Eric K., 2021. "To own or not to own: Stock loans around dividend payments," Journal of Financial Economics, Elsevier, vol. 140(2), pages 539-559.
    11. Dina Pomeranz & José Vila-Belda, 2019. "Taking State-Capacity Research to the Field: Insights from Collaborations with Tax Authorities," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 755-781, August.
    12. Rydqvist, Kristian & Dai, Qinglei, 2007. "Investigation of the Costly-Arbitrage Model of Price Formation Around the Ex-Dividend Day," CEPR Discussion Papers 6074, C.E.P.R. Discussion Papers.
    13. Marcelo Bergolo & Gabriel Burdin & Mauricio De Rosa & Matias Giaccobasso & Martín Leites, 2019. "Tax bunching at the Kink in the Presence of Low Capacity of Enforcement: Evidence From Uruguay," Documentos de Trabajo (working papers) 19-05, Instituto de Economía - IECON.
    14. Paul Carrillo & Dina Pomeranz & Monica Singhal, 2017. "Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 144-164, April.
    15. Carina Neisser, 2021. "The Elasticity of Taxable Income: A Meta-Regression Analysis [The top 1% in international and historical perspective]," The Economic Journal, Royal Economic Society, vol. 131(640), pages 3365-3391.
    16. Odd E Nygård & Joel Slemrod & Thor O Thoresen, 2019. "Distributional Implications of Joint Tax Evasion," The Economic Journal, Royal Economic Society, vol. 129(620), pages 1894-1923.
    17. Harris, Lawrence E. & Hartzmark, Samuel M. & Solomon, David H., 2015. "Juicing the dividend yield: Mutual funds and the demand for dividends," Journal of Financial Economics, Elsevier, vol. 116(3), pages 433-451.
    18. Marcelo Bergolo & Rodrigo Ceni & Guillermo Cruces & Matias Giaccobasso & Ricardo Perez-Truglia, 2023. "Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 15(1), pages 110-153, February.
    19. Dina Pomeranz, 2015. "No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax," American Economic Review, American Economic Association, vol. 105(8), pages 2539-2569, August.
    20. Maria Rosaria Marino & Corrado Pollastri & Alberto Zanardi, 2022. "Withholding self‐employed and business incomes: An application to Italian firms," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1200-1216, November.

    More about this item

    Keywords

    tax fraud; dividend taxes; cum-ex trading; tax evasion; withholding tax;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prf:journl:v:15:y:2021:i:1:p:49-62. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Magdalena Šebková (email available below). General contact details of provider: https://edirc.repec.org/data/vsfspcz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.