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Tuesday 13

November, 2018 7:18 AM



German prosecutors 'raid BlackRock in tax scam probe'

German prosecutors 'raid BlackRock in tax scam probe'

German prosecutors on Tuesday raided the Munich offices of the US mammoth asset manager BlackRock as part of a probe into a massive tax scam, Bild newspaper reported.

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07.11.2018 03:54 PM

German prosecutors on Tuesday raided the Munich offices of the US mammoth asset manager BlackRock as part of a probe into a massive tax scam, Bild newspaper reported.

The daily said 15-20 investigators from the Cologne prosecutors' office carried out the search in connection with their inquiry into the firm's role in so-called dividend stripping or "cum-ex" deals between 2007 and 2010.

The complex scheme allows owners of shares to claim several times over refunds for tax paid only once on dividend payouts -- and is believed to have cost taxpayers billions of euros.

The raid came just days after the head of the supervisory board of BlackRock's German unit, Friedrich Merz, entered the race to replace Chancellor Angela Merkel as head of the centre-right CDU party, shining a spotlight on BlackRock.

Bild pointed out that Merz only joined BlackRock in 2016, well after the suspected cum-ex trickery had been exposed.

A spokesman for the Cologne prosecutors declined to comment on the raid.

BlackRock did not immediately respond to an AFP request for comment but Bild quoted the firm as saying it was "fully cooperating" with German authorities.

The cum-ex method relies on several investors buying and selling shares in a company amongst themselves around the day when the firm pays out its dividend.

The stock changes hands so quickly that tax authorities are unable to identify who is the true owner.

Working together, the investors can claim multiple rebates for tax paid on the dividend and share out the profits amongst themselves -- with the treasury footing the bill.

The practice cost Germany an estimated 7.2 billion euros ($8.2 billion) before it was uncovered in 2012, according to an investigation by 19 media outlets last month.

Germany has opened several criminal probes into the scheme. 

Other European countries were affected too, with Denmark losing some 1.7 billion euros and Belgium 200 million, the investigation found.
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