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I can't figure it out either from the details provided in the NYT article, but there's a more clear article about the related case in Germany: https://www.reut
by dgacmu 8y ago
I can't figure it out either from the details provided in the NYT article, but there's a more clear article about the related case in Germany:
https://www.reuters.com/article/germany-dividends/dividend-tax-scandal-how-banks-short-changed-germany-idUSL8N1991BN https://www.reuters.com/article/germany-dividends/dividend-t...
In this case, though, it involved a bank that owned the shares: The bank would loan the shares to a shorter, the shorter would sell them to a buyer, and both the bank and the buyer would collect the dividend refund.
I wonder if there's some detail the NYT author missed in terms of double ownership that would make the short sale make more sense.
- toast0 8y agoA short sale that's unwound after the dividend makes a lot more sense. Both the buyer and the lender of the shares are owed a dividend, and depending on how the records reflect that, I could see both being able to claim the refund. Under US law, a dividend paid to you by a borrower is taxable as ordinary income, not as a qualified dividend -- usually the borrower (short seller) will pay a premium on the interest to reflect the difference in effective tax rates. I don't know the rules for Denmark, but it seems that having a withholding requirement on the dividend payer ads to complexity, because it requires a refund process. It might be better to have simply required reporting of the income, and maybe required withholding by brokerages.
- _nalply 8y agoPerhaps they should have been able to detect a mis-use of this scale because the refunds exceed the deductions by a wide margin. Or perhaps a lot of people never request a refund so they were used to keep billions of dollars in dividend taxes so this went under their radar?...