Global investors lost more than $22bn through unclaimed withholding tax on foreign asset returns in the past fiscal year, according to a new research report from London-based tax reclamation service specialist Goal Group. The US lost $2.8bn in unclaimed withholding taxes, the highest figure of any one country. The UK and Luxembourg saw the second and third highest losses with $1.2bn and $900m, respectively.
Tax reclamation sales manager at Goal Group, Vicky Dean, said withholding “is not treated with the due attention it deserves”. Although a proportion of the tax on crossborder investment return is recoverable, “a substantial amount is still [languishing] in foreign tax regimes”, she said, shortly after the report was published.
Despite a decline in the percentage of withholding tax left unclaimed, total losses have increased 30% since the company’s last report in 2011, due to a surge in market capitalisation and dividend distribution. Figures quoted by the Goal Group report also reveal that crossborder equity investments more than doubled in value for from 2003 to 2012. As fund managers continue to increase the proportion of foreign securities in portfolio investments, the shortcomings in tax recovery require “urgent attention” according to Goal Group.
The report concludes that technology can now help custodians to overcome country variations in regulatory and procedural rules by automating certain procedures. “There is still a clear opportunity for custodians to increase the scope and efficiency of reclamation services,” Ms Dean said.