$6 Billion in Withholding Taxes Left Unclaimed World-Wide In 2002

by Amanda Banks, Tax-News.com, London

01 July 2003

Investors from the United States left some $830 million in withholding tax on dividend and interest income from foreign investments unclaimed in 2002, according to new research revealed to the Financial Times.

The new study compiled by software specialists, Goal has found that worldwide, some $6 billion was left unclaimed by investors from withholding taxes. Whilst US investors shouldered the largest single portion of the burden, they were closely followed by the UK ($689 million unclaimed) and Japan ($678 million).

From the US point of view, it is thought that ignorance surrounding the rules concerning American Depository Receipts has played a large part in this shockingly high amount of unclaimed money. ADRs allow foreign firms to be traded on US-based exchanges and are also used to raise capital via dollar-denominated securities.

"The underlying security is an overseas stock and there is a huge amount of tax to be reclaimed," Stephen Everard, managing director at Goal, explained to the FT.

In contrast to the US and the UK which have similar 'tax relief at source' systems, most countries around the world operate using a retention or withholding tax on dividends and interest payments on investments held by overseas residents.

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