Tesco Personal Finance is to pay the €40 Government stamp duty for the first year for new Tesco Visa credit cardholders, as part of a major drive to attract new customers in Ireland.

The offer will apply to the first 10,000 new cardholders who apply for the Tesco card from now until March 31st, meaning the initiative could lead to a potential tax bill of €400,000.

Card providers deduct the €40 stamp duty from cardholders' accounts and pass it on to the Revenue in April. The industry views the tax as a barrier to competition and has lobbied for its removal.

Ms Fay Hogg, marketing manager for Tesco Personal Finance, said independent research had found that 60 per cent of people would be encouraged to switch cards if the stamp duty was paid by the new card provider.

Some 45 per cent of people surveyed said a keen interest rate was the main motivator when picking a credit card provider, while 39 per cent identified being a current customer of the company as a reason for applying for that company's credit card.

Tesco's standard rate on new purchases is 16.9 per cent APR. The interest rate on outstanding debt balances transferred from other cards to the Tesco card is 1.9 per cent APR for up to six months, down from 5.9 per cent.

This brings the rate more in line with other providers, who offer introductory balance transfer rates of 0-2.9 per cent.

This week saw the arrival of a new entrant to the Irish credit card market, as Barclaycard International launched a Manchester United-branded card.

Meanwhile, Tesco Personal Finance is expected to increase the range of products it offers. It currently sells credit cards and life assurance online and using in-store brochures.

In the UK, Tesco sells motor, home, travel and pet insurance, and also offers mortgages, loans, savings and investment products.