Ireland, Stock Exchange officials will meet the Revenue today in a continuing campaign to head off the imposition of stamp duty on a major hedge fund activity.
The Revenue wants to tax ‘Contracts for Difference’, or CFDs. According to estimates, these account for around €3bn a month in trading on the Irish exchange, or 30pc of the total.
CFDs are highly leveraged, like most hedge fund dealings, and investors can borrow up to ten times the actual capital they put in and add it to the contract. This makes for big gains (and losses) on the investor’s capital.
Because they do not actually buy the shares, but strike a contract on the movement, the deals have been exempt from stamp duty. Revenue is concerned at the potential loss of €30m a month if 1pc stamp duty were levied.
The Exchange and stockbroking firms argue that the business will switch to London, so the revenues will not be achieved. They fear that Dublin share prices and turnover would fall, and that other leading companies would relist on London.
“A reduction in turnover like that, combined with CFD holders becoming sellers of stock, could create significant downward pressure on the stock market,” said Adrian O’Carroll, head of equities at Merrion Capital.
The issue, it is believed, could end up in the courts.