In conjunction with today’s hearing, the Senate Permanent Subcommittee on Investigations has issued a 77-page report, Dividend Tax Abuse: How Offshore Entities Dodge Taxes on U.S. Stock Dividends. From the Introduction:
Each year, the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses. The U.S. Senate Permanent Subcommittee on Investigations has examined various aspects of this problem, including how U.S. taxpayers have used offshore tax havens to escape payment of U.S. taxes. This Report focuses on a different subset of abusive practices that benefit only non-U.S. persons, have been developed and facilitated by leading U.S. financial institutions, and have been utilized by offshore hedge funds and others to dodge payment of billions of dollars in U.S. taxes owed on U.S. stock dividends.
Using phrases like “dividend enhancement,” “yield enhancement,” and “dividend uplift” to describe their products, U.S. financial institutions have developed, marketed, and profited from an array of transactions involving multi-million-dollar equity swaps and stock loans whose major purpose is to enable non-U.S. persons to dodge payment of U.S. taxes on U.S. stock dividends. In addition, many of the offshore hedge funds that have benefited from these abusive transactions appear to function as shell operations controlled by U.S. professionals who are helping them dodge U.S. dividend taxes. Six case histories illustrate the scope and nature of the offshore dividend tax abuse problem.
Here are the witnesses who testified at this morning’s hearing, along with links to their testimony:
- Panel 1: Reuven S. Avi-Yonah (Irwin I. Cohn Professor of Law, Michigan)
- Panel 2:
- Joseph M. Manogue (Treasurer, Maverick Capital, Dallas)
- Richard Potapchuk (Director of Treasury & Finance, Highbridge Capital Management, New York)
- Gary I. Wolf (Managing Director, Angelo, Gordon & Co., New York)
- Panel 3:
- John Derosa (Managing Director, Lehman Brothers, New York)
- Matthew Berke (Managing Director, Morgan Stanley, New York)
- Andrea Leung (Global Head of Synthetic Equity Finance, Deutsche Bank, New York)
- Panel 4: Douglas H. Shulman (Commissioner, IRS)
Press coverage:
