The associations representing Irish technology companies are lobbying for changes in share options legislation to be included in the Finance Bill, although Finance Minister Charlie McCreevy ducked the issue in last week's Budget.

New rules included in the 2001 Finance Act are so restrictive that only two companies have been able to obtain Revenue approval for new schemes since it was passed. Gains under qualifying schemes are taxed at 20% rather than 42% in the hands of employees.

The Irish Software Association and ICT Ireland, which represents foreign-owned and domestic technology companies say that the legislation contains a major drafting error which is preventing companies from using it.

Parthus executive vice-president Peter McManamon, who heads up the taxation sub-committee of ICT Ireland, says that the phrase "similar terms" in the legislation was causing the problem, since it was being interpreted by the Revenue to mean that for a share option scheme to qualify for favourable tax treatment under the legislation it had to grant everyone in a company the same number of options irrespective of seniority and responsibility.

"I don't see how anyone would have wanted to be as restrictive as it is," he said. Mr McManamon said he realised that Government was cautious about re-opening the gates to widespread abuse of share option legislation such as had existed prior to a clamp-down in 1992, but that members of his tax group like Intel, Microsoft, Dell and Openet all had schemes which did not qualify under the current legislation, although their schemes had been approved by the US Security and Exchange Commission, but did not qualify under the Irish legislation.