Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 25:

In page 80, between lines 4 and 5, to insert the following: "Report on the application of stamp duty on the buy-back of shares

49.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 all purchases by companies of their own shares, and requiring companies to provide data pertaining to all purchases of their own shares to Revenue.".

This amendment calls for a report on the application of stamp duty on purchases by companies of their own shares and requires them to provide data to Revenue pertaining to all such purchases. As the Minister knows, a stamp duty charge of 1% normally applies to the purchase of shares. However, under certain circumstances, when a company buys its own shares, that charge does not apply. In fact, it only applies where the share buy-back takes places by means of a stock transfer. In the two other scenarios in which share buy-backs happen, where they are purchased through a direct contract or through a security settlement system, no stamp duty charge applies.

In documents I obtained by means of a recent freedom of information request, Department of Finance officials stated: "As there is a transfer of the beneficial ownership of the shares from one person to another in exchange for valuable consideration, there is clearly a conveyance or transfer on sale of the shares and therefore a charge of stamp duty at 1%." However, that does not apply in most cases. There are three ways in which share buy-backs can happen. For one of the ways, a 1% charge applies. For the other two ways, even though there is a change in beneficial ownership, there is a valuable consideration and conveyance has happened, no stamp duty applies.

Share buy-backs have become a popular way for companies to drive up their share price. They help to enrich corporate executives and shareholders. As we see reported in the media, Irish publicly listed companies, including retail banks and large developers, are on course to spend €1.9 billion buying back their own shares this year. Share buy-backs can come at the expense of the wider economy and the greater good. Money spent on share buy-backs that benefit corporate executives and shareholders is money not being spent on investment in the company in the first instance, on reducing prices for consumers, on increasing employee wages or on a number of other measures that could have a benefit to the wider economy and society. If we look across the water, this is the very reason the Biden Administration is introducing legislation to apply an excise tax on share buy-backs.

In practice, very few businesses, and only small, private companies, use the method of stock transfer to perform share buy-backs, which is the method for which the 1% stamp duty charge applies. This amendment calls for that gap to be closed. In a reply to a recent parliamentary question, the Minister told me that Revenue estimates, based on prior-year transactions, that the amount of revenue forgone on share buy-backs is between €5 million and €20 million in a calendar year. However, we know Revenue is unable to gather comprehensive data on share buy-backs that are not subject to stamp duty because companies have no obligation to report that information. For two of the three ways in which share buy-backs are taking place, which are the methods used by the larger companies, there is no stamp duty payable and, therefore, no obligation to report this information to Revenue. There is a wide variation in the estimated annual yield forgone because share buy-back programmes are implemented on an irregular basis by a limited number of companies.

Moving forward, it is clear that share buy-backs require greater regulation and consideration. At present, there is no requirement for companies to report information on these purchases. There should be such a requirement to allow for greater analysis. The amendment calls for that and also seeks to deal with the gap whereby stamp duty applies to only one of the ways in which companies buy back their own shares. There is also a massive gap in the data, with some reputable commentators in the media suggesting that the value of share buy-backs in the Irish economy is in the billions. I am not criticising Revenue for not having those data. One cannot have the data if one is not given the data because there is no requirement to provide them. There is a serious issue here. I raised it last year and the year before. From recollection, although I could be wrong, the then Minister for Finance agreed to look into the matter. I am interested to hear the Minister's views on it.