Irish Revenue Trying To Impose Stamp Duty On CFDs

by Amanda Banks, Tax-News.com, London

31 March 2006

The Irish Inland Revenue, which collects 1% stamp duty on stock exchange transactions, is planning to extend the tax to Contracts For Differences (CFDs), which currently don't come in for stamping because they don't involve buying the underlying shares.

Irish Stock Exchange officials met the Revenue earlier this week to try to persuade them that Ireland's CFD business, which is said to underly €3bn a month in trading on the Irish exchange, would simply decamp to London if the tax is imposed.

CFD trades are effectively bets on the future movement of shares, up or down, and can be highly leveraged. Traders can make their deals either with the equivalent of a brokerage (call it a bookie?) or direct with other punters. Either way, because they do not actually buy the shares whose price is the object of the trade, it has been assumed by all concerned in the UK and Ireland that stamp duty cannot apply.

Either government could legislate to tax CFDs in all kinds of ways, but the direct application of stamp duty might well be knocked down by the courts.

In any case, the financial sector thinks that stamp duty on shares is an antiquated and anti-market tax which can only damage the future of the UK and Irish stock exchanges, and would like to see it abolished.

No doubt the UK's HMRC is watching its Irish brother's campaign with the greatest interest. The UK Treasury is not good at abolishing taxes, but is noted for its ability to invent new ones.

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