Taoiseach Brian Cowen has confirmed that he was lobbied in 2006 by a number of financial institutions and brokerage firms before reversing a decision from the Revenue Commissioners to abolish stamp duty relief for Contracts for Difference (CFDs).
In a statement issued this afternoon, the Taoiseach said he had been lobbied by the Irish Stock Exchange, the London Investment Banking Association, Davy Stockbrokers and Price Waterhouse Coopers but said he had "followed official advice in relation to the reversal of the proposed change".
A contract for difference (CFD) is a form of derivative instrument that enables an investor to take a position on stock and its likely performance, without owning the shares - because they don't own the shares, they pay no stamp duty.
In March of 2006, the Revenue Commissioners announced plans to abolish stamp duty reliefs applied to shares bought to cover CFDs.
This morning in the Dáil, Labour Party leader Eamon Gilmore asked Mr Cowen who had lobbied him at that time in relation to the proposal. Mr Gilmore said the reversal of that Revenue's decision allowed reckless trading to continue without tax liability and caused the instability at Anglo Irish Bank.
Responding in the chamber, Mr Cowen said he had reversed the decision on "official advice".
In his follow-up statement he said "representations were made to the Revenue Commissioners and the Department of Finance by the Irish Stock Exchange and by the London Investment Banking Association. The issue was also raised by Davy Stockbrokers and Price Waterhouse Coopers".
He said the representations made by the London Association reflected the fact that the majority of the CFD business concerned originates with London-based firms.
He added that a survey of Irish Stock Exchange member firms conducted by the Exchange indicated that the aggregate value in 2005 of trades in Irish shares associated with CFD contracts represented 30 per cent of the overall value of trades on the Irish Stock exchange for that year.
"On the basis of submissions received from my officials at the time, I considered carefully the representations made as they seemed to have substance, taking account of the international nature of stock markets.
In the circumstances, and having regard to the fact that the relevant stamp duty legislation predated the development of the CFD market, I decided to have the matter reviewed in advance of the next Budget and I issued a statement to that effect."
The Finance Bill 2007 confirmed the tax free status of shares bought to cover CFDs.
