Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 64:

In page 114, between lines 29 and 30, to insert the following: "Report on the application of stamp duty on the buy-back of shares

64.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the application of stamp duty on the purchase by companies of their own shares where that purchase is not affected by means of a stock transfer form.".

This is in relation to a report that is required on the application of stamp duty on the purchase by companies of their own shares where that purchase is not affected by means of a stock transfer form. We discussed this in the Dáil Chamber as recently as last week. At that time, I stated:

A stamp duty ... of 1% normally applies to the purchase of shares. Under certain circumstances, however, when a company buys its own shares, this charge does not apply. [That] stamp duty only applies when a share buyback takes place by means of a stock transfer form. In the other two cases, when they are purchased through a direct contract or through security settlement systems, no charge applies.

One of the Minister's own officials made it clear in one of the documents that were obtained through freedom of information where the official stated that if there is a transfer of the beneficial ownership of the share from one person to another in exchange of valuable consideration, there is clearly a conveyance or transfer on sale of the shares and, therefore, a charge of stamp duty of 1%. However, we know that is not being applied. It is not being applied in the Finance Bill.

It has become popular for companies to use this mechanism to drive up their share price. It also has the benefit of enriching corporate executives and, indeed, shareholders. It is suggested that Irish publicly-listed companies are on course to spend more than €1.9 billion buying back their own shares this year. The companies involved include retail banks and large developers.

However, share buybacks, as I said, can come at the expense of the company and, indeed, the broader economy. When one is spending money on the share buyback to benefit the share price, corporate executives and shareholders, it is money that is not spent on, for example, reducing prices to consumers, increasing employees' wages or, indeed, investing in the company in the future. That is the reason, as I stated previously, that the Biden Administration is looking at introducing excise tax to share buybacks.

In practice, few, and only small, private companies perform share buybacks through a stock transfer form. I believe the gap should be closed. The Minister stated previously to me in reply to a parliamentary question that the cost to the Exchequer of this is between €5 million and €20 million in each calendar year based on the prior year's transaction. Revenue is not able to gather comprehensive data on share buybacks that occur that are not subject to stamp duty as there is no obligation to report this information. If they are not subject to stamp duty, they do not need to report it. Obviously, there is a wide variation in the estimated annual yield forgone. That is because the share buyback programmes are implemented on a regular basis and usually by a limited number of companies, some of which are quite large.

I believe that, moving forward, share buybacks require further and greater regulation. It is appropriate that we deal with this and that is what the amendment is about. For example, as I said, there is no requirement on a company to report information on share buybacks. In my view, companies should be required to do so, and that would allow for a greater analysis of share buybacks. It is one change that could be made to see what is happening out there, in terms of how many shares and the cost, and the tax forgone, as a result of share buybacks that do not fall under the stamp duty charge of 1%.