Investors lose $17.39bn of returns due to un-reclaimed withholding tax
May 11 2011, 9:00 am11th of May 2011
According to a report by Goal Group, global investors are forfeiting returns from their cross-border securities because withholding tax on dividends and income is not being properly reclaimed
- US investors came top with losses of $3.24bn
- “Clear opportunity” for custodians to increase efficiency of reclamation services
- Fund managers “should” use technology-based services to perform the “complex” process
Investors are losing returns because withholding tax on dividends and income is not being correctly reclaimed, according to a new report by Goal Group.
The report shows that global investors are likely to have lost $17.39bn (£10.72bn) of returns from their cross-border shares and bonds in 2010, while US investors suffered the most with losses of $3.24bn (£1.95bn). UK investors forfeited $1.65bn (£1.02bn), while Japan came third with $1.33bn (£0.81bn)
Goal Group claims that lost returns through un-reclaimed tax have risen substantially as cross-border shareholdings have become increasingly popular. Unless reclamation levels improve, un-reclaimed tax will keep rising. According to the report, around 25% of reclaimable withholding tax lies un-reclaimed in foreign tax systems each year.
Although several leading custodians have already recognised the market opportunities of effective tax reclamation services, there is “clear opportunity” for custodians to increase the range and efficiency of reclamation services, the group said.
Stephen Everard, the group’s CEO, called for fund managers and custodians to take the issue seriously and try to enhance investors’ returns as much as possible.
He went on to say that technology is available to automatically execute the “highly complex” task of reclaiming withholding tax which involves incorporating different forms of data, formats and procedures from a multitude of different legislatures around the world.
“So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,” Everard added.
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