An Irish Times guide to the world of personal finance. This week we field questions on compulsory share purchase, tax on bank cards and CGT & indexation.

Compulsory share purchase

How and why can a company in which I have some shares compel me to sell those shares to it? Can I not refuse to sell? What are the consequences?

Mr A.R., Dublin

I was expecting letters along these lines since it became clear that the management of a number of companies listed on the Dublin exchange were intent on taking them private. While such moves are generally a reaction to frustration at the market's refusal to value such companies in a way seen as fair by their managements, the success of such tactics often comes at the expense of loyal small shareholders like yourself.

Quite why, after the market has taken a three-year beating, companies should decide now is the time to leave the market just as recovery looms is puzzling. Those shareholders who have stuck with these companies through the bad times might well have expected their perseverance to pay off now but then that is the risk investors take.

Unfortunately for you, the situation is that you can be forced to sell your shares, despite your wishes, during a takeover of the company. If a group looking to win control of the company in which you hold shares secures support from the holders of more than 80 per cent of the shares in issue, it can compulsorily acquire the balance at the price offered in the takeover document.

It is important to note that, contrary to your belief in the letter, the company in which you bought the shares is not buying those back compulsorily, it is the person or company acquiring those shares.

This has happened a few times recently - notably with Eircom and Jefferson Smurfit. It is now a situation being faced by small shareholders in Dunloe Ewart and shortly I would guess in Conduit.

As to the why of it, the simple reason is that there are provisions in the Companies Acts specifically allowing such action. The thinking behind it is that a dissenting shareholder owning, say, 19.9 per cent of a company could totally undermine the efforts of a new management. To forestall that, the State has decided that a suitor who succeeds in attracting the support of 80 per cent of the stock is probably making a reasonable offer and is entitled to take over the company without undue impediment.

As a result, the answer to your second question is that you cannot refuse to sell your shares in these circumstances. In any case, it does not much matter if you do. Once the offer goes unconditional, your shares have no further voting, dividend or other rights. If you hold on to them, you are merely depriving yourself of whatever limited return is to be had by accepting the offer.

Indeed, as has happened with rebel Eircom shareholders, you may find yourself facing administrative charges from the company for the cost of holding on to money owing to you under the terms of the takeover.

Tax on bank cards

Could you please clarify the date from which the increased duty of €40 is due? I cancelled my Mastercard the day after Budget Day. I have been told that I may have to pay the new duty, as it was effective from Budget Day on current cards. Is this correct?

Mr G.B., e-mail

I fear the information you have been given may be correct. Like everything else in the Budget, one has to wait for the Finance Bill to see the precise nature of the change and the banks are certainly lobbying hard on this issue. However, unless specifically stated otherwise, such charges and changes in the tax system tend to kick in on the date of the Budget.

I know this is somewhat confusing given that you will generally be charged for your bank cards in April in most cases, but it does appear you will be liable to the charge from the date of the Budget.

I read the Laser/ATM question before Christmas with interest. I believe there is one flaw in your answer. You mention that the couple in question will have an annual bill of €80 on their accounts. They will only pay annual stamp duty on their credit cards. The Laser/ATM cards will not incur an annual charge. These cards incur a stamp duty only when replaced and they usually have a lifespan of a number of years.

Ms M., e-mail

I am aware that you e-mailed me subsequently to confirm that my answer was correct but just in case there is any confusion out there on this issue, it is worth re-emphasising that the stamp duty on ATM cards and the new duty on Laser cards will be levied annually and not on the lifespan of the card.

Given the track record of some people I know in losing and getting cards replaced almost on a monthly basis, the latter could truly be an expensive process.

For those who did not get the earlier answer, the duty will be levied at a rate €10 per card for Laser and ATM cards (€20 per card if you have a combined ATM/Laser card) and €40 per account for credit card accounts, regardless of the number of cards on the account.

For the couple in question with a joint account, credit cards and ATM/Laser cards, that means a charge of €80 a year, up from €31.50 previously.

CGT and indexation

I would be grateful if you could clarify this issue. If there is no indexation, then "gains" which are less than the rate of inflation over the period are surely, in real terms, losses but they will be taxed as gains, increasing the loss. This seems essentially unjust.

In fact, any investment would have to appreciate by 20 per cent over the rate of inflation even to maintain, let alone increase, its value. Under these circumstances, is there any point in investing money at all or have I got it wrong?

L.C., Wicklow

I am sure you would be popular in Merrion Street given the Minister's avowed interest in simplifying the tax system and in getting to the heart of any given issue. You are correct when you say you will in future be taxed on a capital gain even though, after allowing for inflation, your asset may have gained no value at all.

After all, the purpose of indexation in the first place was to allow for the effect of inflation on your investment before imposing capital gains tax.

As you say, given a capital gains tax rate of 20 per cent, your investment will effectively have to perform 20 per cent better than the prevailing inflation rate in a given year simply to stand still. For instance, if inflation is running at 5 per cent, you will need to get a return of at least 6 per cent on your money to break even.

Given the low interest rate environment in which we find ourselves and the very uncertain outlook for stock markets, this could be a challenge in itself. However, it is a bit simplistic to suggest that the abolition of indexation, per se, invalidates the reason for investing in the first place. Most long-term equity and property investments would expect to yield more than 120 per cent of the prevailing rate of inflation over the period.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2, or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.