A billion here, a billion there...all of a sudden...yeah, you're talking real money. And one assumes that's what the accountants at banks figure when they smile about the latest scam to pad the bottom line for banks. It's called "dividend arbitrage"--and that "arbitrage" already gives a hint.
It's legal--but still a scam that costs the taxpayers. It does, however, make banks about a billion dollars a year. In the bigger picture of hundreds of billions of dollars in bank revenues, it's tiny. However, it shows the lengths to which the financial manipulators try to concoct schemes to make more money.
The Wall Street Journal explains (paywall):
Known as "dividend arbitrage," the strategy is run largely from London, where the banks temporarily transfer ownership of a client's shares to a lower-tax jurisdiction around the time when the client expects to collect a dividend on those shares, according to people familiar with the matter.
The maneuver typically enables bank clients to reduce taxes from as much as 30% of the dividend payment to 10% or so—and sometimes to zero. The savings are divided between the client, bank and entities that take ownership of the shares. The business largely involves stocks listed in Europe and Asia.
Bank of America is under the microscope for the practice but isn't alone:
Other banks that arrange similar transfers of corporate stock include Citigroup Inc., Deutsche Bank, Goldman Sachs Group Inc., and Morgan Stanley, according to clients and people involved in the business. Banks collect fees on the transactions.
B of A loves the tactic:
Last year, Bank of America estimated that trades aimed at helping clients reduce withholding taxes on stock dividends generated more than $1.2 billion for the bank from 2006 to 2012, according to people familiar with the internal estimates.
Just another tax-dodging tactic that robs the Treasury. Wanna know why your roads have holes? This is an example.