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There is a statement in Paul Wimott Introduce Quantitative Finance:

Often capital gains due to the rise in a stock price are taxed differently from a dividend, which is often treated as income. Some people can make a lot of risk-free money by exploiting tax 'inconsistencies'

Can anyone give an example how this exploits work?

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A prime example of tax arbitrage is described in the paper Cross-Border Investing with Tax Arbitrage: The Case of German Dividend Tax Credits by Robert L. McDonald (excerpt below). In this case, dividend income can be used to gain tax credits and as a result, the next day dividend drop exceeds the dividend value.

German dividends typically carry a tax credit which makes the dividend worth 42.86% more to a taxable German shareholder than to a tax-exempt or foreign shareholder. This results in a penalty for foreign investors who buy and hold German dividend-paying stocks. I document that, as a result of the credit, the ex-day drop exceeds the dividend by more than one-half of the tax credit, and show that futures and option prices embed more than one-half of the tax credit. The existence of the credit creates opportunities for cross-border tax arbitrage—in which foreign holders of German stock transfer the dividend to German shareholders—and implies that it is tax efficient for foreign investors to hold derivatives rather than investing directly in German stocks.

Another arbitrage strategy used by non-financial firms that does not involve cross border transactions is described in the paper How Prevalent is Tax Arbitrage? Evidence from the Market for Municipal Bonds, by M. Erickson et. al.:

[Non-financial firms] hold municipal bonds tax-free while simultaneously borrowing and deducting the interest expenses from their taxable income.

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