Curated By: Shankhyaneel Sarkar
Last Updated: November 13, 2023, 12:28 IST
London, United Kingdom (UK)
Indian-origin hedge fund trader Sanjay Shah who made a last-ditch attempt last week at the UK Supreme Court to halt a $1.8 billion trial with Denmark-based officials over Cum-Ex tax dividend trades.
Cum-ex is a financial scandal that involves dividend tax exploitation. Investors manipulate stock trades and claim tax refunds on dividends that are not rightfully theirs.
Cum-ex is named after Latin terms meaning with/without. It involves selling stocks with a dividend (cum) but delivering them without it (ex).
They, then, engage in rapid buying and selling of shares around the dividend payout date which creates confusions about who is the rightful owner. Then, multiple claimants will appear to seek refunds for the same dividend tax.
This is an unethical practice and several European countries have lost billions in tax revenue due to this. People who have engaged in these practices have faced regulatory crackdowns and legal actions.
Shah’s lawyers claim that the UK is not the proper place for Skatteforvaltningen (the Danish Customs and Tax Administration) to bring its claim over the cum-ex allegations.
A lower court earlier gave a ruling in favour of Shah but the court of appeal sided with the Danish tax agency. There are scores of other traders involved and they will face a civil trial that will begin in April. It will be one of the longest in UK Supreme Court’s history as it may last one year.
Shah’s legal team maintains that the UK is not the right place for the claim because issues related to foreign tax law cannot be ruled on here.
“The applications for refunds were all based on a lie that the applicants had paid tax in the first place which, on the respondent’s pleaded case, they had not,” Judge David Lloyd Jones said, according to Bloomberg.
Shah, who is the founder of Solo Capital Partners LLP, is now a key figure in the scandal over alleged tax fraud involving several European nations. Denmark and Germany have charged dozens of bankers, traders and lawyers over the use of the strategy through which they earned millions of euros through duplicate tax refunds.
Shah is in Dubai, waiting to be extradited from the United Arab Emirates to Denmark. He faces a criminal trial in Denmark, which has been postponed while his extradition is planned. He also faces a trial in Germany. The hedge fund manager maintains he is innocent.
(with inputs from Bloomberg)