Dividend Tax Abuse: How Offshore Entities Dodge Taxes on U.S. Stock Dividends

Publication

Dividend Tax Abuse: How Offshore Entities Dodge Taxes on U.S. Stock Dividends

Abstract

The Senate Committee on Homeland Security and Governmental Affairs' Permanent Subcommittee on Investigations conducted an investigation on offshore dividend tax abuse. The investigation found U.S financial institutions structuring abusive transactions that aided non-U.S. clients to dodge U.S taxes on stock dividends. In addition, the investigation found that offshore hedge funds were frequent participants in abusive dividend tax transactions, leading to billions of dollars in lost tax revenues, and showed the lack of effective action from the Department of Treasury and IRS.