Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The focus of the amendment introduced in the Finance Bill was to prevent the exclusion for unquoted shares whose value is derived from land in this country applying where a company obtains a so-called soft listing. Gains in respect of sales of such shares by a non-resident person are not currently liable to capital gains tax. The words "actively and substantially traded" were included in the amendments in the Finance Bill to ensure that shares that are listed on a stock exchange but not actively traded, that is, where there is no change in the ownership of the shares, would not qualify for the exclusion in sections 29 and 980 for quoted shares.

Concerns were raised with Revenue that the proposed changes would have a negative impact on the ability of Irish banks and other financial institutions to securitise debt, issue covered bonds and raise finance generally. The term "shares" is limited to shares that are actively and substantially traded on a stock exchange. Section 29 and 980 of the Taxes Consolidation Act 1997 define shares as including stock or security. The view of Revenue is that loans secured on land and estate generally constitute an interest in land for the purposes of section 980 of the Taxes Consolidation Act 1997 and are regarded as securities for the purposes of that section. It was considered that bonds issued by securitisation companies backed by commercial and residential mortgages could be caught by the new provisions as they may not be actively traded. In addition, covered bonds are issued by Irish financial institutions and backed by Irish commercial and residential mortgages. It is unclear whether those bonds are traded in sufficient quantities to satisfy the "actively and substantially traded" test.

As regards bank debt, it is arguable that all Irish bank debt is backed by Irish property and Irish-secured debt. Such bank debt would previously not have been caught by sections 29 and 980 of the Taxes Consolidation Act 1997 as they are listed. Although the bonds are listed, trading in them is often infrequent as they are generally held as long-term investments.

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