Dividend Tax Fraud : raising awareness of dividend stripping schemes

Dividend stripping is a type of fraud that is committed through a complex mechanism of trading, selling and repurchasing shares over a certain period to unlawfully avoid payment of dividend taxes, or to claim unjustified tax reimbursements.

Dividend stripping in its many forms poses a great challenge to the tax bases of numerous jurisdictions and may create market distortions that corrode the integrity of the financial system.

This report is intended to raise awareness of dividend stripping frauds and provides a number of recommendations for countries around recognising the risk, improving domestic co-ordination and expanding international co-operation. In particular, tackling dividend stripping requires strong domestic inter-agency co-ordination and international co-operation, as well as the sharing of information between jurisdictions. Countries may therefore wish to prepare targeted actions and comprehensive strategies against this phenomenon, including not only tax administrations and law enforcement, but also financial regulators and supervisory authorities, as well as anti-money laundering competent authorities. Legislative changes may also be required in some cases.

OCDE (2023), Dividend Tax Fraud : Raising Awareness of Dividend Stripping Schemes, Éditions OCDE, Paris, https://doi.org/10.1787/70ee934c-en.

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This report was published during the 6th OECD Forum on Tax and Crime, held in Rome, Italy, on 5-7 December 2023, which gathered the heads of tax crime investigation agencies from around the world, together with other key stakeholders in the fight against tax crime, senior representatives of other financial crime agencies, and regional and international organisations.

Based on the experiences of a number of jurisdictions, it seeks to raise awareness among investigators and policymakers of different schemes that have been used to circumvent the payment of dividend taxes, including through co-ordinated cross-border activities.

Some of these schemes, which can result in substantial revenue losses, have been categorised as criminal behaviour by domestic courts, while others may fall within the realm of tax avoidance or aggressive tax planning. As well as describing some of the most commonly seen schemes, the report suggests a series of countermeasures that jurisdictions may wish to consider to address abusive dividend stripping.

These include raising awareness among key stakeholders, both public and private sector, improving domestic co-ordination and expanding international co-operation mechanisms. In particular, it suggests that jurisdictions may wish to consider establishing timely and efficient sharing of information between supervisory authorities, tax authorities and law enforcement to detect dividend stripping schemes, as well as to set up cross-agency joint investigation teams where appropriate.

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