The CumEx case is now the subject of a complaint to the French “Parquet national financier” (National Financial Prosecutor’s Office) for laundering tax fraud and aggravated fraud, which was filed on Monday 29 October 2018 (1). This complaint follows revelations by Le Monde and eighteen other European media about the CumEx scandal – a scandal based on tax optimisation practices, or even (the investigation is ongoing) tax fraud (2). In addition to its scope, duration and financial techniques, this case is also significant because of a statement allegedly made by the organiser of the practices in question, who was described as “Mr. CumEx” (3):

“Anyone who takes issue with the fact that there’ll be fewer nurseries in Germany because of the trade we do is in the wrong place.” (4)

The “trade” in question is that of tax optimisation (or possibly fraud), and those to whom the sentence was addressed were the new recruits of “Mr. CumEx.” This sentence is the subject of our article. We will try to imagine what Adam Smith would have thought of it and, more generally, how he, himself, would have judged this case.  


The person who reports the sentence reproduced above is a former right-hand man of Mr. CumEx (5). He added that, after it had been pronounced, “nobody left the room,” or, in a way that was not without ridicule, that no one had left the “spaceship.” Let’s add that “Mr. CumEx” denied that he had violated the law. In his view, he has only “exploited all possibilities of the law,” according to the words used by the protagonists of the optimisation system. “Whether that is morally reprehensible or not, is no criteria,” Mr. CumEx is quoted as saying (6). Two additional observations deserve to be made: on the one hand, the calculating and methodical spirit with which tax possibilities have been exploited; on the other hand, the justification of the optimisation system by a vision close (apparently) to a right-wing libertarianism or a form of anarchism: “The state is the enemy because it seeks to ‘steal’ from the people,” can be read on the website “Cumex-files,” “or rather from the ‘clients.’ It does not matter whether these clients already have more than enough. To these people, taxes are costs. And costs are there to be reduced, ideally to zero.’”  


Let us return to the sentence: “Anyone who takes issue with the fact that there’ll be fewer nurseries in Germany because of the trade we do is in the wrong place.” It gives rise (presumably) to a moral judgment of blame that is more or less summarized by this reaction read on a site reporting on the media consortium’s investigation: “You literally have to have to have no remorse, and no care for another human being” (7). But what would Adam Smith, the famous moral philosopher and economist of the Scottish Enlightenment, have thought? (8) Had he been informed of this scandal, Adam Smith would certainly have also expressed his strong disapproval. There are three ways to demonstrate this: by referring, first, to his point of view on the rich; second, to his conception of the fair distribution of tax burden; and finally, to his perspective on self-love. The first reason for his supposed negative judgment is the selfishness and “rapacity” of the rich, which Smith emphasizes bluntly in his Theory of Moral Sentiments (9). Here is the passage in question:

“The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.”

In light of these comments, it is rather easy to imagine how Smith would have interpreted the sentence “To these people, taxes are costs. And costs are there to be reduced, ideally to zero.” He would probably have commented on it with his own words taken from the Wealth of Nations: “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” (10) The second reason is Adam Smith’s concern for a fair distribution of the tax burden. He was certainly in favour of a proportional tax on all the subjects of a state – subjects that, in his opinion, were like the co-owners of a land estate. He expressed this position in the form of a maxim on taxation in general:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

But a little further on in Book V of the Wealth of Nations, Smith argued that the rich should contribute more than proportionally to their income:

“The luxuries and vanities of life occasion the principal experience of the rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this fate of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the publick experience, not only in proportion to their revenue, but something more than in that proportion.”

Whether we retain his proportional vision or his progressive vision of taxation, Smith would undoubtedly have blamed those who are indifferent to the fact that, by their action, “there’ll be fewer nurseries in Germany because of the trade we do.”  


However, advocates of the idea that “taxes are costs, and costs are there to be reduced, ideally to zero” could try to get Adam Smith back on their side by invoking the importance he attached to the principle of self-love, i.e., our “regard to our own private happiness and interest.” The famous remark of the Wealth of Nations on the positive effects of merchants’ selfishness is one of its best known illustrations:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

We also find, in the Theory of Moral Sentiments, this observation on moral neutrality – or “innocence” – of the self-love principle:

“Self-love was a principle which could never be virtuous in any degree or in any direction. It was vicious whenever it obstructed the general good. When it had no other effect than to make the individual take care of his own happiness, it was merely innocent, and though it deserved no praise, neither ought it to incur any blame.”

But supporters of the thesis that “taxes are costs, and costs are there to be reduced, ideally to zero” should not forget the blameworthy aspects of self-love. According to Smith, self-love can distort our judgment about our own actions and create illusions about the importance we think we have in the world. Smith states that, if we do want the approval and esteem of others as well as the approval and esteem of an impartial judge, we must absolutely “humble the arrogance of [our] self-love.” What would those who believe that “taxes are costs” say about this? Shouldn’t they acknowledge with Adam Smith that the “arrogance of their own self-love” has deprived them, or will deprive them, of the sympathy of others? Because the others – the “spectators,” Smith would say – cannot “enter into that self-love by which he prefers himself so much to [these others].” And, to use the fine expression of the economist Ronald Coase, they themselves can in no way “appear worthy in [their] own eyes” (11). They should not bet on Adam Smith to comfort them. Alain Anquetil (1) “‘CumEx Files’: une plainte déposée au Parquet national financier,” Le Monde, 29 October 2018. (2) See this article published in Le Monde: “‘CumEx Files’: Le droit fiscal est si compliqué que les administrations peinent à l’interpréter.” It explains the two aspects of the survey, that relating to tax optimisation and that (possibly) relating to tax fraud. (3) See “How Europe’s taxpayers have been swindled of €55 billion” on the “Cumex-files” website. (4) Ibid. (5) On the website “Cumex-files,” he is named “Benjamin Frey” – a pseudonym. The site indicates that Frey is “an insider who is now testifying against his former colleagues.” (6) Source: the “Cumex-files” website. (7) Source: the website “ Europe.” (8) Questions in the form of “What would Adam Smith think?” are rather common. (9) A. Smith, The Theory of Moral Sentiments, 1759, D. D. Raphael and A. L. Macfie (ed), Oxford University Press, 1976. (10) A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, R. H. Campbell and A. S. Skinner (ed), Oxford University Press, 1976. (11) R. H. Coase, “Adam Smith’s view of man,” The Journal of Law & Economics, 19(3), 1776: The Revolution in Social Thought, p. 529-546.

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