Pearse Doherty (Donegal, Sinn Fein)
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96. To ask the Minister for Finance the estimated annual revenue forgone as a result of stamp duty not being applied to share buybacks not effected by means of a stock transfer form; and if he will make a statement on the matter. [55908/22]

Pearse Doherty (Donegal, Sinn Fein)
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A stamp duty tax 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. In fact, the 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. Will the Minister close the gap to ensure that a charge applies to all forms of share buyback?

Paschal Donohoe (Dublin Central, Fine Gael)
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A stamp duty charge of 1% normally applies to the purchase of shares. However, I am advised by Revenue that the stamp duty treatment of share buybacks depends on the form in which the shares are held and the method by which the buybacks are affected.

Share buyback refers to the practice whereby a company purchases or buys back its own shares. For shares held in certificated or paper form, the shares may be bought back in two ways. The first is by means of a standard stock transfer form. The second is where the shareholder and company enter into a contract or share purchase agreement for the sale of the shares, following which the shareholder hands over the share certificates to the company. For shares held in uncertificated or electronic form, the shares may be bought back via an electronic settlement system.

Shares bought back by means of a stock transfer form are chargeable to stamp duty. Where a company enters into a contract or share purchase agreement, Revenue accepts that there is no stamp duty chargeable on the transaction by virtue of section 31(1)(b) of the Stamp Duties Consolidation Act 1999. For shares bought back via an electronic settlement system, it has been a long-standing Revenue practice to confirm that stamp duty does not apply to such transactions. Revenue estimates that based on prior year transactions, the revenue forgone on share buybacks is between €5 million and €20 million in each calendar year. However, Revenue is unable to gather comprehensive data on share buybacks that occur and are not subject to stamp duty as companies have no obligation to report this information. The wide variation in the estimated annual yield forgone is because share buyback programmes are implemented on an irregular basis by a limited number of companies.

Pearse Doherty (Donegal, Sinn Fein)
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Revenue just applies the laws we set this House. Share buybacks have become a popular way for companies to drive up their share prices and enrich corporate executives and shareholders. Irish publicly-listed companies are on course to spend more than €1.9 billion buying back their own shares each year, including retail banks and large developers. However, share buybacks can often be at the expense of the company or, indeed, the broader economy. Money spent on share buybacks to benefit corporate executives and shareholders is money not spent to reduce prices for consumers, increase employee wages or invest in the company itself. If we look across the Atlantic, that is the reason the Biden Administration is introducing legislation to apply an excise tax on share buybacks. In practice, few and only small private companies perform share buybacks through stock transfer forms where the stamp duty applies and, therefore, this gap should be closed in legislation. I ask the Minister to consider closing this gap with an amendment at Report Stage of the Finance Bill.

Paschal Donohoe (Dublin Central, Fine Gael)
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I would love to be able to point out whether this is a matter Sinn Féin considered in its alternative budget but I cannot because it is not available. I did evaluate it, however. In evaluating and consulting with my officials on it, the view I have reached is that a change to it at this point could limit the ability of our capital markets to operate. Those capital markets are important for providing funding and investment to companies based in Ireland. I did give consideration to it. I have decided that at this point, more risks could be associated with this change than benefits. I will not be bringing forward a Committee Stage amendment in that regard. The Department of Finance will continue to monitor this matter, however.

Pearse Doherty (Donegal, Sinn Fein)
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We have been calling for this, which the Minister will know because he has our alternative budget. It is online. We have asked the Department to make a clear signal to him as to where he can access it. However, let us deal with the issue here. The Minister talked about how we need to pay for stuff. Up to €20 million in foregone tax is lost here. The loss is difficult to justify, especially when the transactions in question are of limited value to a company and the practice can lead to corporate executives and shareholder enrichment at the expense of the company, investment in employee compensation or lower price for consumers. It is clear that share buyback regulation deserves attention. The opportunity cost of share buyback is considerable. As I said, resources could be used to lower prices and, indeed, increase productivity or workers' pay.

The Minister's own officials make it clear, stating that as there is a transfer of the beneficial ownership to the shares from one person to another in exchange for valuable consideration, there is clearly a conveyance of transfer on sale of the shares and therefore a charge of stamp duty at 1%. That is not being applied because the law has a gap. There is no rationale for allowing such a large volume of share buybacks to slip through the net without the 1% stamp duty being paid. The Minister can deflect all he wants. This is a sensible proposal that could benefit the State by up to €20 million. That is what we are talking about. Why will the Minister not introduce this measure? Why will he not close the gap that his own officials have identified and believe there is justification for?

Paschal Donohoe (Dublin Central, Fine Gael)
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I have no doubt that Sinn Féin's pre-budget statement is going to be available later today.

Pearse Doherty (Donegal, Sinn Fein)
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It always was. Stop deflecting. I think I even posted it to the Minister.

Paschal Donohoe (Dublin Central, Fine Gael)
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Not at all. Actually, the Deputy did post it to me - I have a copy of it - but it was not available today. It has not been available over the last number of days and the Deputy knows why. The figures do not add up, the proposals are a source of risk and any new issue, any bus that goes by, Sinn Féin wants to hop on it.

Pearse Doherty (Donegal, Sinn Fein)
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Answer the question. Why is the Minister allowing these rich executives to keep €20 million?

Paschal Donohoe (Dublin Central, Fine Gael)
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Sinn Féin does not want the country to know what its track record is and what its proposals are.

Pearse Doherty (Donegal, Sinn Fein)
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Answer the question. Why is the Minister going against his officials' advice, allowing these executives-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I am going to answer. I am only too happy to answer the Deputy's question. We did indeed consider this matter following the publication of the tax strategy group paper. As I said to the Dáil, we are going to continue to monitor this matter. It was the view of my Department, and I assessed the matter myself, that any change in the current regime could cause unintended consequences, including conflicting with European and domestic capital markets, and might raise potential issues for Irish companies that are accessing US markets. That is the reason.

Pádraig O'Sullivan (Cork North Central, Fianna Fail)
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The next question is in my name but it is being taken by Deputy Aindrias Moynihan.