Liste, Philip (2022). 'Tax Robbery Incorporated: The Transnational Legal Infrastructures of Tax Arbitrage' (Global Cooperation Research Papers 30). Duisburg: Käte Hamburger Kolleg/Centre for Global Cooperation Research (KHK/GCR21). DOI: 10.14282/2198-0411-GCRP-30.
Philip Liste's analysis of the cum/ex trading scandal starts with 'some type of court ethnography'. As a visitor in courtroom S 0.11 of the Regional Court in Bonn (LG Bonn), Liste becomes a witness to the testimonies of two British equity traders, who executed cum/ex operations, receiving mild suspended sentences thanks to intense cooperation with the court. The scandal of a legal practice that triggered tax returns for amounts for which income tax had not been withheld, developed in the first decade of the 2000s.
But Liste is not interested in the court proceedings per se. Being a trained lawyer and professor of Political Science with a focus on the politics of Human Rights, Fulda University of Applied Sciences, Liste, an Associate Fellow of the Centre, has a research focus on Global Tax Governance and Transnational Legal Theory. In this paper his point of departure consists of a re-framing of the relationship between state regulators (the tax administration) and the cum/ex industry. While a usual understanding talks of 'loopholes' in the tax system and a subsequent race to close those loopholes, Liste aims at an understanding of 'law in context'. He revisits positions of legal realists (Holmes, Hale) and new legal realists since the 1960s (Macaulay, Riles).
Law is not a superstructure, it is not merely 'in the books' but 'in action'. It is the application of law that constitutes the reproduction or change of power structures. Law itself is deeply involved in the processes of creating various forms of ‘non-legality’ and vacuums are indeed ‘structured by legal norms and normative practices’ (Fleur Johns). Liste derives his central concept from this line of argument. A 'legal knowledge practice', as he terms it, connects the different actors in this 'theatre': tax administration, the German Ministry of Finance, the German Banking Association and a special committee of the German Parliament. Taken together with what forms the cum/ex industry in a narrow sense - the trading operators and their clients and infrastructure - a system materialized, namely a 'critical normative infrastructure that made cum/ex possible'.
This argument leads to another central finding; Liste sees the internationalization of this 'tax robbery' technique as a practice at hand, given the transnational constellation of regulatory regimes. An ongoing adjustment of those regimes 'enables and structures the practice that in the case at hand is called cum/ex.' From here, Liste makes a strong point about the dubious role of the German Banking Association, who informed the Ministry in 2007 'to indicate that there may be a problem with the legality of certain financial trading structures'. Since the Banking Association represents the interest of the German finance industry, Liste is quite justified to ask about the motives for this proactive counselling of the Ministry. In the end, it seems quite possible that the Banking Association took a step in which possible illegality was outsourced or at least a legal risk managed (Jahressteuergesetz 2007, the added tax mechanism would not be applicable to trading structures with foreign financial institutes). Here the 'management of financial risk' becomes an instance and an application of Liste's concept of a 'legal knowledge practice'.
In his preface Frank Gadinger asserts that the paper 'gives a micro-oriented perspective on how legal infrastructures make dark finance possible and how specific legal practices and practical knowledge reproduce a system of polycentric governance with harmful and immoral net effects for a global public.' Liste even takes up the cudgels for the domestic court room as a space where (dark varieties of) transnational legal knowledge practices become (and are made) publicly visible.