Statement by the Taoiseach Brian Cowen on the issue of CFDs raised by Labour Party leader Eamonn Gilmore during Leaders Questions in the Dáil today.
During Leaders Questions in the Dáil this morning, Deputy Eamon Gilmore raised the issue of Contracts for Difference (CFDs) and the change proposed by the Revenue Commissioners in their tax treatment in 2006 which was reversed by me as Minister for Finance. He specifically asked who had lobbied me at that time in relation to the proposal.
I made clear to the House that I followed official advice in relation to the reversal of the proposed change by the Revenue and the Department of Finance has confirmed that.
A contract for difference (CFD) is a financial instrument that enables investors to bet on share price performance, without owning the shares. Stamp duty relief applies to share dealings involving CFDs.
The Department of Finance has confirmed that in March 2006, the Revenue Commissioners announced that they proposed to change the existing practice whereby stamp duty reliefs were being applied to shares bought to cover CFD exposure.
Following the announcement by Revenue, the Department of Finance received representations that there would be severe consequences for the liquidity of the Irish Stock Market and, therefore, on the ability of Irish companies to raise capital here.
In particular, representations were made to the Revenue Commissioners and the Department of Finance by the Irish Stock Exchange and by the London Investment Banking Association. The issue was also raised by Davy Stockbrokers and Price Waterhouse Coopers.
The representations made by the London Association reflect the fact that the majority of the CFD business concerned originates with London-based firms. A survey of Irish Stock Exchange member firms conducted by the Exchange indicated that the aggregate value in 2005 of trades in Irish shares associated with CFD contracts represented 30 per cent of the overall value of trades on the Irish Stock exchange for that year.
On the basis of submissions received from my officials at the time, I considered carefully the representations made as they seemed to have substance, taking account of the international nature of stock markets. In the circumstances, and having regard to the fact that the relevant stamp duty legislation predated the development of the CFD market, I decided to have the matter reviewed in advance of the next Budget and I issued a statement to that effect.
The issue was subsequently addressed in the context of Finance Bill 2007, with the introduction of ‘Intermediary Relief’, which was debated fully in the Oireachtas.