Global cross-border investment losses on unclaimed withholding tax hits $22.4 billion

25-Sep-2014 Intellasia | Press Release | 1:51 PM Print This Post

New research from global withholding tax (WHT) and class action services specialist, Goal Group, reveals that $22.4bn of investors’ rightful returns from foreign shares and bonds were lost in the latest financial year because WHT on dividends and income is not being reclaimed. This represents an increase of nearly 30% in the annual amount lost since 2011. Japan chalked up the fourth highest losses at $964m, behind the US ($2.77bn), the UK ($1,15bn) and Luxembourg ($968m).

 

Reclamation rates on WHT have seen a marginal improvement since Goal Group last examined the situation in 2011, with just under 24% now being left unclaimed. However, major increases in market capitalisation and dividend distribution since the last Goal Group study has meant that worldwide unclaimed WHT has seen a substantial net increase.

 

Cross-border investing and equities are on the rise. According to the statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities investments rose 81% between 2003 and 2012 and the value of cross border equities investments rose 141%, over the same period.

 

This rising proportion of portfolio investment devoted to foreign securities means that the lack of tax recovery needs urgent attention from fund managers and custodians. Investors are becoming increasingly rigorous in their scrutiny of investments and are putting pressure on fund managers to provide greater transparency.  In fact, some fund managers are even making this fiduciary duty to maximise returns compulsory clauses within the contracts they hold with investors.

 

Jonathan Hu, Director of Sales & Relationship Management APAC, Goal Group, comments: “As the global economy continues to recover, investors are increasingly adopting an international investment strategy to maximise their earnings from securities. In all events, these cross-border shares are subject to a tax on returns that is deducted at the source. Although a proportion of this is available to be recovered, a substantial amount is still being languished in foreign tax regimes as the reclamation of WHT is not treated with the due attention it deserves.”

 

“All those in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. A number of leading custodians have already recognised the market opening and effectively utilised tax recovery services, both for their clients and as an interbank services opportunity.  However with 24% of recoverable WHT lying unclaimed in foreign tax systems every year, there is still a clear opportunity for custodians to increase the scope and efficiency of reclamation services.”

 

Tax recuperation rates, rules and timings vary widely around the globe, making the retrieval method complex. However, technology solutions are now more widely available to automate the process, making it a profitable procedure for custodians and fund managers under pressure from their investor clients.

 

 

 

Methodology

Goal Group combined its own proprietary information on withholding tax reclamation rates with a wide range of global sources on foreign portfolio investment and dividend payments in different markets around the world.  This data was then used, along with up-to-date evidence on the complex picture of withholding/reclaimable rates by country, to calculate actual sums left unclaimed, both globally, and for individual countries with the larger investor communities.

 

Please contact Lindsell Marketing (below) for a copy of the full Goal Group report.

 

Ends

Press Contacts

Ashma Paul, Lindsell Marketing
(t) +44 (0)20 7402 0510, (e) [email protected]

 

Christopher Smith, Lindsell Marketing

(t) +44 (0)20 7402 0510, (e) [email protected]com

 

About Goal Group Limited (Goal)

Established in 1989, Goal is the leading class actions and tax reclamation services specialist.  Goal has a truly blue-chip client base including many of the world’s largest global custodians, asset managers, private banks, pension funds, hedge funds, high net-worth individuals, investment banks, prime brokers and fund managers spread widely across Europe, the United States and the Far East.

In the tax reclamation field, Goal’s flagship product GTRS (Global Tax Reclamation Solution) – available as installed software or as an outsourced service – helps custodians reclaim tax on income from cross-border securities that has been overwithheld by foreign governments based on international double taxation treaties. This is delivered to financial institutions globally, including some of the largest custodian banks.

Goal’s class actions service is provided via the wholly-owned subsidiary Goal Global Recoveries Limited (“GGRL”) and supports individuals and corporate entities who have suffered financial loss from owning shares in a company where there has been mis-management and/or unlawful behaviour.  Goal has calculated that between 2000 and 2014, over £659 million of unclaimed withholding tax has been recovered.

 

Ashma Paul

Account Executive

Lindsell Marketing

7 Praed Street

London W2 1NJ

 

Tel: +44 (0)207 402 0510

www.lindsellmarketing.com

 

Category: PRAsia

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