“Cum/ex transactions.” A lucrative tax loophole that major German banks have been using. Spiegel reported the story on 28 Apr 2013, saying it had been broken by the Berlin Sunday version of Die Welt (Die Welt am Sonntag, WamS) but so far search results for it online are only turning up in Der Spiegel. The loophole, estimated to have cost the German government 12 billion euros so far, was created by corporate tax reform legislation of the SPD + Green Party coalition in 2002. Though discovered by officials shortly thereafter in 2002, and reported all the way up the chain of command, the loophole was not fixed by Hans Eichel (SPD) or his successor Peer Steinbrück (SPD, currently running against Angela Merkel for chancellor of Germany). Amendments to the law in 2007 made the situation worse, Spiegel reports that WamS reports. Wolfgang Schäuble (CDU) appears to have waited several years to fix the problem as well, though now the order appears to have gone out.

The problem was this: under certain circumstances capital gains tax could be reimbursed multiple times. After e.g. stocks or bonds were sold short but before they were bought back to conclude the transaction, German bureaucracy sometimes obscured to whom the stocks or bonds belonged: the person loaning the stock, the short seller or the end customer. The question would be trivial, say financial reporters, were it not for the fact that sometimes if the sale occurred right before a dividend the German IRS would erroneously issue more than one get-your-tax-back certificate for capital gains on the stock. Honest people would ignore the unearned get-your-tax-back certificate, but others would deliberately game the system to get the treasury to reimburse them these taxes even conceivably more than five times, said professor Heribert Anzinger of the University of Ulm.

This looks like the dividend stripping loophole HypoVereinsBank and others were reported in 2012 to have used to extract money from the German fiscus. Etymologically, Wikipedia contributors explain, when a company’s general assembly of shareholders decides to issue a dividend, the dividend is usually issued the day after the assembly meeting, called the “ex day” (“Ex-Dividende”). The day before the ex day is called the cum day, for arcane reasons.

(COOM   ECKS   geh SHEFF teh.)


“Side incomes,” translated by as ancillary or auxiliary income; casual, incidental earnings or discretionary earnings; emoluments and perquisites. On 16 Oct. 2012 the Bundestag debated the SPD’s proposal to have Bundestag members disclose all incomes in addition to their M.P. compensation. Angela Merkel’s CDU/CSU party was opposed, as was their coalition partner the FDP, who said their primary concern was that working lawyers would have to disclose their clients. Greens and Leftists said they were ready for full transparency.

The debate was triggered by attacks on a vulnerability of the SPD’s challenger to Angela Merkel in the upcoming election. Peer Steinbrück, who was called the Bankenschreck (terror of the banks, banks’ bane) when he was Finance Minister under an SPD government, has since then been receiving high speaking fees from banks and e.g. hedge funds. Calls from rival party members for Steinbrück to disclose these fees have turned up opportunities to improve the laws regulating extra-parliamentary compensation. The SPD’s proposal suggested disclosing the type of work, amount paid and payer’s name, because apparently that’s not required now. Violations would be punished by a reduction in the M.P.’s salary. reports that Peer Steinbrück (SPD) is the top earner in the Bundestag, followed by mostly members of the ruling conservative CDU/CSU and FDP parties (nine of the top ten, yet because of the nature of the old system these are minimum incomes and not accurate numbers).

Update on 25 Oct 2012: The ruling coalition CDU/CSU + FDP finds themselves in a bind because while they wanted to attack Steinbrück, they never wanted transparency for supplementary M.P. incomes, reports Spiegel-Online. The ruling coalition has now agreed to a reform plan that changes the disclosure system from three steps to ten steps. The three-step scale was up to EUR 3500, 3500 to 7000, and >7000, monthly. The ten-step scale will be, either monthly or annually (hasn’t been decided yet), EUR 1000 to 3500, to 7000, 15000, 30000, 50000, 75000, 100000, 150000, 250000 and >250000. With the old scale an M.P. who earned e.g. EUR 150,000 for a speaking engagement only had to disclose EUR 7001. The SPD is concerned that under the new system an M.P. could take ten EUR-900 fees without having to disclose, so they have proposed disclosure of fees exceeding EUR 10000 in one year. The SPD and Leftists (Die Linken) parties remain committed to full transparency. The Greens have proposed two models: full disclosure or a thirteen-step scale. The frequency of mandatory reporting is also still under debate; points out that with modern technology this useful information can be made available very rapidly to voters.

Update on 22 Feb 2013: Today the Bundestag agreed on a new 10-step plan to disclose M.P.’s supplementary incomes.

(NAY ben eye n coon fteh.)

Blog at