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Cum-Fake: Improper Dividend Withholding Tax Reclaims Through Pre-Release ADRs

Author

Listed:
  • David Murphy
  • Maximilian Todtenhaupt
  • Floris T. Zoutman

Abstract

Cum-fake schemes use pre-release ADRs without underlying shares to create dividend withholding tax (DWT) refund claims. Using daily ADR data for 2008–2019 and a triple-differences design, we document lending patterns consistent with these schemes. Before 2014, excess dividend-window ADR lending equaled 0.35% of issuer market value in DWT countries, versus 0.04% for U.K. ADRs, where dividends generally face no DWT. This gap vanished after the SEC intensified scrutiny in 2014. ADR and underlying security prices show no persistent wedge. Calibration suggests a tax revenue loss of $264–640 million.

Suggested Citation

  • David Murphy & Maximilian Todtenhaupt & Floris T. Zoutman, 2026. "Cum-Fake: Improper Dividend Withholding Tax Reclaims Through Pre-Release ADRs," CESifo Working Paper Series 13106, CESifo.
    • Handle: RePEc:ces:ceswps:_13106
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    Keywords

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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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