NRW Proposes Legislation to Bolster Prosecution of Cum-Ex Crimes
**North Rhine-Westphalia Takes Steps to Combat Cum-Ex Tax Fraud**
In a bid to tackle the pervasive issue of Cum-Ex tax fraud, Peter Biesenbach, North Rhine-Westphalia's Minister of Justice, has announced plans to introduce the "Draft Law to Combat Particularly Serious Tax Evasion" in the Bundesrat. This draft law aims to extend the statute of limitations, allowing public prosecutors to continue investigating past cases, and to strengthen criminal and tax laws.
The Cum-Ex scandal, a complex financial transaction that led to multiple parties receiving tax refunds on the same dividend payment, has cost the state a double-digit billion amount, according to estimates. Biesenbach believes that the current legal situation is insufficient to prosecute Cum-Ex crimes effectively, and many offenders will not be held accountable, potentially forcing the state to write off billions of euros.
The draft law would seek to deter Cum-Ex and other sophisticated tax evasion schemes by increasing criminal liability, extending investigation capabilities, and enhancing penalties for offenders. The proposed measures include enhanced penalties, expanded investigative powers, whistleblower protections, asset seizure and confiscation, and cross-border cooperation.
The draft law would also directly target the mechanisms used in Cum-Ex schemes by defining Cum-Ex transactions as criminal tax fraud, amending current tax law to prevent the exploitation of dividend arbitrage practices, and holding financial professionals accountable for their role in these schemes.
The Cologne Public Prosecutor's Office is currently investigating around 70 complex Cum-Ex cases involving numerous financial institutions. With approximately 900 suspects, the state of North Rhine-Westphalia is the focus of these investigations.
Biesenbach also plans to toughen confiscation rights to ensure that offenders cannot keep their ill-gotten gains. The Corona Tax Relief Act, however, has a significant loophole that could result in substantial financial losses.
While the exact text of a North Rhine-Westphalia-specific draft law is not yet available, these measures reflect recent legislative trends in Germany to address large-scale financial crimes. If a specific draft law or bill number is released for North Rhine-Westphalia, further official documentation would offer more concrete details. As of now, the approach described aligns with broader German and European efforts to combat serious tax evasion.
In the proposed draft law, other sophisticated tax evasion schemes similar to Cum-Ex, like dividend arbitrage practices, will be targeted for enhanced criminal liability and extended investigation capabilities. To deter such activities, the draft law aims to amend current finance business laws, strengthen penalties, and establish cross-border cooperation.
