Dáil Éireann Debate, Tuesday - 23 July 2024
338. Deputy Pearse Doherty asked the Minister for Finance the estimated annual revenue forgone as a result of stamp duty not being applied to share buybacks not effected by means of a stock transfer form; and if he will make a statement on the matter. [31960/24]
View answer339. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue raised in each of the years 2025, 2026, 2027, 2028 and 2029 by applying a 1% rate of stamp duty on all forms of share buybacks, including those effected by means other than a stock transfer form. [31961/24]
View answerI propose to take Questions Nos. 338 and 339 together.
With respect to the Deputy’s first question, I am advised by Revenue that the Stamp Duty treatment of share buybacks depends on the form in which the shares are held and the method by which the buybacks are effected.
For shares held in certificated (i.e., paper) form, the shares may be bought back in two ways. The first is by means of a standard stock transfer form. The second is where the shareholder and the company enter into a contract or share purchase agreement for the sale of the shares, following which the shareholder hands over the share certificates to the company.
For shares held in uncertificated/dematerialised (i.e., electronic form), the shares may be bought back via an electronic settlement system. Euroclear Bank operates the settlement system for trading in Irish shares on Euronext Dublin.
Revenue has always maintained that shares bought back by means of a stock transfer form are chargeable to Stamp Duty.
Where a company enters into a contract or share purchase agreement, Revenue accepts that there is no Stamp Duty chargeable on the transaction by virtue of section 31(1)(b) of the Stamp Duties Consolidation Act 1999. This section provides for Stamp Duty to be charged in respect of any contract or agreement for the sale of any estate or interest in any property as if it were an actual conveyance on sale of the estate, interest or property. However, it specifically excludes from its scope the sale of certain property, including shares.
For shares bought back via an electronic settlement system, it has been a long-standing Revenue practice to confirm that Stamp Duty does not apply to such transactions.
I am advised that Revenue does not have comprehensive data on share buybacks as there is no statutory requirement in place for such data to be provided to them by way of a Stamp Duty return.
However, based on information provided to Revenue in relation to the Stamp Duty treatment of such transactions and on publicly available information, Revenue tentatively estimates that the annual revenue foregone as a result of share buybacks not being effected by means of a stock transfer form is as follows:
2019: €8.07million
2020: €1.75 million
2021: €11.27million
2022: €19.07 million
2023: €39.1 million
2024 YTD: €32.43 million
It is important to note that, as there is no requirement to provide Revenue with specific data on share buyback transactions, the estimates provided by Revenue are provisional in nature and subject to change.
The wide variation in the estimated annual revenue forgone is because share buyback programmes are implemented on an irregular basis by a limited number of companies.
With respect to the Deputy’s second question, I am advised by Revenue that as details of share buybacks are not required to be reported on a Stamp Duty Return, there is no available data on which to base an accurate estimate of the potential revenue raised by applying a 1% rate of Stamp Duty on all forms of share buybacks for the years he has requested. I am further advised that Revenue cannot provide estimates for later years due to the uncertainty surrounding such estimates, particularly given the discretionary nature with which share buybacks are carried out.
It should be noted that estimates in respect of changes to the rate of Stamp Duty applied to shares more generally is included in Revenue’s Ready Reckoner, which is published on the Revenue website at www.revenue.ie/en/corporate/documents/statistics/ready-reckoner.pdf. An update of the Ready Reckoner is due to issue in the coming weeks.
