Bloomberg – Lehman Brothers Holdings Inc., UBS AG and Merrill Lynch & Co. are among Wall Street firms that concocted derivatives and stock-loan deals to help offshore hedge funds dodge hundreds of millions of dollars in U.S. taxes, according to a U.S. Senate committee investigation.
The Internal Revenue Service looked the other way while securities firms sold complicated financial products designed to skirt a law requiring them to withhold U.S. taxes on stock dividends paid to offshore investors, said Senator Carl Levin, chairman of the Permanent Subcommittee on Investigations.
Levin, a Michigan Democrat, said he wants the IRS to pursue back taxes or penalties against Wall Street firms and their hedge-fund clients that got around a 30 percent dividend tax.
“We are going to press the IRS to go after what is obviously a scheme,” Levin said, while briefing reporters yesterday about the committee’s yearlong probe. “The IRS should be going after this. They are not. They have been pussyfooting around this.”