Fight against “Cum cum” fraud: behind the scenes of Bercy’s retreat in the face of parliamentarians

"Cum Cum." This could be the title of a series, especially since unexpected twists and turns and attempts at interference are rife. However, the epilogue came on Thursday, July 24. After weeks of tense exchanges between Parliament and the government, a system for combating dividend tax fraud that no longer allows for any circumvention has finally been finalized.

Since 2018, following revelations by an international media consortium, a mechanism for circumventing the tax levied on dividends paid by listed companies has been stirring up controversy within the tax authorities. In France, a foreign owner of shares listed in France must pay a withholding tax of 12.8% for individuals and 25% for companies. Most of the time, these securities are entrusted to a bank whose mission is to manage them.

For a generous fee, financial institutions then devised a way to circumvent this tax, to the delight of their clients. On the day the dividends are paid, the stock owners resell them for a period of twenty-four or forty-eight hours. At that point, the French bank officially becomes the owner of the shares, which are, in effect, no longer subject to this tax. The shares are then returned to their true owner. In this sleight of hand, the state is recouped from €1.5 to €3 billion in tax revenue each year.