German tax authorities are investigating Barclays over the use of legal loopholes which cut the British lender's tax bill by billions of euros, a German newspaper reported on Saturday. Daily Sueddeutsche Zeitung said German authorities obtained internal bank documents dated 2007-2010 in which Barclays mapped out lucrative tax loopholes related to naked short-selling transactions before and after the dividend payout dates of stocks.
With the help of a trading platform it operated in Luxembourg, Barclays obtained more tax credits than the tax it actually paid in these transactions, the paper said. These trades took place for more than 10 years until 2012 at a cost to the taxpayer of about 280 million euros annually, Sueddeutsche said, citing German finance ministry documents. Authorities are now investigating whether taking advantage of these loopholes amounts to tax evasion and whether back taxes are due.
Barclays said in a statement that in relation to the transactions in question it "has an open and constructive approach to engagement with the relevant tax authorities and is committed to continuing to do so". "We have complied with all applicable laws and do not accept any suggestion of misconduct." Other banks are subject to investigations linked to the tactic also known as dividend stripping, which Germany outlawed in 2012. A source close to UniCredit's German unit HVB earlier this year told Reuters the bank expects a hit of up to 200 million euros from a tax evasion probe relating to share deals several years ago.