Cross-border shareholders forfeit £13.2 billion in unclaimed withholding tax
UK investors’ losses exceed £910 millionThe latest research from Goal Group, a leading global provider of withholding tax reclamation and securities class action recovery services, shows that £13.2bn ($18.9bn) of investors’ rightful returns from foreign shares and bonds were lost in the latest financial year because withholding tax on dividends and income is not being fully reclaimed.
UK investors suffered the biggest losses out of all major European markets, missing out on £910m ($1.3bn) in recoverable returns, a significant rise since 2012 (£756m). Investors domiciled in the US relinquished £2.5bn ($3.57bn), up from £1.8bn two years previously.
Despite rises in developed markets, the research reveals a net decrease of 15% in global losses due to unclaimed withholding tax between 2012 and 2014. This reflects a reduction in dividend payouts in emerging markets and the fall in bond yields since the previous study.
Goal estimates that average tax reclamation rates have improved by 5% since the company’s last report on the global tax reclamation landscape in 2013. Currently just under 23% of excess tax remains unclaimed each year.
Stephen Everard, Chief Executive Officer at Goal Group, said: “Just under a quarter of recoverable withholding tax still languishes in foreign tax systems each year, which amounted to a loss of £910 million to UK cross-border investors in 2014. Funds that reclaim tax typically boost returns by at least 25 basis points annually, yet there is still the belief that the complex reclamation process isn’t worth the trouble. With the right technology and services, this is simply not true.
“Custodians and fund managers have a fiduciary duty to maximise returns for shareholders, and withholding tax reclamation is a vital element of this. The gains become even more significant in view of rising proportions of portfolios devoted to cross-border investments and continued rises in global dividend payouts.”
Goal has recovered hundreds of millions of pounds in withholding tax for its global client base, which includes five of the top ten global custodians and six of the top ten global fund managers.
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 information was then used, along with up-to-date information 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.
About Goal Group
Goal Group is a leading global provider of withholding tax reclamation and securities class action recovery services.
For over 25 years, Goal has helped the world’s largest financial institutions and the global investment community fulfil their fiduciary duty to reclaim excess tax on cross-border income, and seek legal redress for shareholders who have suffered financial losses due to corporate mis-management and/or unlawful behaviour.
Goal delivers end-to-end claims, recovery and reporting solutions that combine legal and procedural expertise with proprietary, market-proven software. It is the only provider to have received the ISO 27001:2013 certification for information security.
Headquartered in London, the company delivers its services globally through a network of offices in New York, San Francisco, Philadelphia, Melbourne and Hong Kong, and through strategic partnerships.
The company monitors in excess of £8 trillion in client assets worldwide. Clients include five of the top ten global custodians and six of the top ten global fund managers, alongside hundreds of asset managers, private banks, pension funds, hedge funds, high net-worth individuals, investment banks and prime brokers.