GlobeTax, the world's largest filer of withholding tax reclaims, has released the results of an aggregation survey showing $186 billion or more of withholding tax on cross-border investments income that is recoverable in 2006/07.
Director of Marketing Ross McGill states, "Previous surveys probably gave a restricted view of the market, in our opinion, because they were derived from limited data sets. And so, while the results were interesting, they were of questionable value. Therefore, we decided that instead of a bottom up analysis, the top down method would be more relevant and useful. After all, at the end of the day, research is useless unless it can be used to inform a course of action or strategy."
The methodology of the 2006 study was conducted through GlobeTax's New York and London offices and focused on independent market sources to establish the size of the withholding tax issue. They used the cross border assets under management at the top global custodians as the start point of the study, according to eMediaWire.com.
GlobeTax provides tax recovery services for Global custodians, Investment banking houses, brokerage and pension funds, among others and considers the complex mix of treaties which exist between governments.
"The research also takes into account "minimizing factors" such as the large proportion of dividend income that is subject to relief at source or RAS and so, while still taxed, the amount the investor receives is correct and there is no over-taxation," according to VP of Marketing Ken Lipton. "Balancing this to some extent were "maximizing factors" such as Statutes of Limitations, where investors may have several years in which to claim their entitlement, during which time these entitlements continue to build"
"Education and recovery strategies are beginning to work and withholding tax is starting to rise up the agenda of fund managers," adds McGill. "Collaborative industry and regulatory efforts to minimize impact, such as G30 and Giovannini, are also to be applauded, as are initiatives to make the reclaim process itself more efficient, such as the recently launched tax reclaim service bureau on the SWIFT network. But despite these, the analysis still translates into high probabilities that many funds may have significant entitlements that will be lost in this financial year and in the future."
GlobeTax President and CEO Martin S. Foont, who commissioned the analysis study, said the results showed, "The message in the numbers is very clear. In order to maximize fund performances and minimize corporate governance concerns, all funds should have a clear and published withholding tax policy and active, benchmarked and documented implementation of it."