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The head of Euronext Dublin has criticized a “bizarre” tax system that creates an “unequal playing field” and called for reform, following a series of high-profile departures from the Irish Stock Exchange.
Irish building materials giant CRH, the most valuable stock in the small Dublin market, exited in September as part of a switch from Europe to New York as its primary listing. Gambling group Flutter and packaging company Smurfit Kappa have announced they will leave Dublin this year. Diageo, the drinks group that owns Guinness, suspended its listing in Ireland in May.
Darryl Byrne said in an interview with the Financial Times that the exchange is determined to create the next wave of “Ireland’s global champions in funding growth through our markets”. . . . But there are some things that are causing difficulties. ”
He said there was an “unsustainable situation” for Irish companies listed in the US, where trading of their own shares in the US was exempt from stamp duty but a 1% fee was charged on the domestic market. . “So we end up on this uneven playing field.”
The Irish exchange became part of the Euronext group of European stock exchanges in 2018, but Mr Byrne said it was also at a disadvantage in Europe due to stamp duty rules.
He is calling on the government to cut taxes and bring Ireland in line with European countries such as France, which has a 0.3% rate, and Italy, which has a 0.1% rate. The UK tax rate is 0.5%.
“It’s strange… If you look across Europe, it’s completely incompatible,” he said. “It’s a disincentive.”
The departures of CRH, Flutter and Smurfit Kappa are a serious blow to the Irish Exchange. The two companies accounted for 55% of trading volume from January to September last year, partly as traders closed out positions in CRH.
Both CRH and Smurfit Kappa have moved their primary listings from London to the New York Stock Exchange, the latter following its merger with US rival WestRock. Flutter currently maintains its main listing in London, but plans to list additionally in New York. The group, headquartered in Dublin, said the housing list was too complex to maintain.
Other companies, including food groups Greencore and Arituta, construction and plumbing contractor Grafton, and energy and distribution company DCC, have all exited in recent years.
The government has also warned that companies such as nutrition companies Granbia and Kerry and insulation group Kingspan will follow suit, further depleting a market that has seen just six IPOs in the past six years and just one from 2021 onwards. He expressed concern that this may be the case.
Finance Minister Michael McGrath said the headaches associated with Dublin’s delisting were not unique and that “we need to find an EU solution to address the common challenges facing EU exchanges”.
However, the size of Ireland’s market and the fact that many Irish companies seek funding from larger pools of capital in the UK and US make Ireland particularly at risk.
The UK’s exit from the EU has made it even more isolated. In the past, many Irish companies had dual listings in London, taking advantage of London’s financial market infrastructure, but that is no longer the case.
The tax regime further impedes the exchange’s ability to keep Irish companies listed in the US by offering dual listings on the Atlantic Stock Market.
ASM was founded in 2015 and is compliant with US regulations. However, it has failed to attract any listings, and this situation could reverse after the tax authorities refused this summer to extend the stamp duty exemption that would have applied to Irish companies listed on the ASM. gender is low.
The government said stamp duty “continues to be considered by the government”. [finance] Byrne estimated that the levy would raise €500 million in 2022, and that even without the CRH there would be around €350 million in revenue.
Euronext Dublin is the successor organization to the Irish Stock Exchange, which was founded in 1793, a year after the NYSE. It is currently the second smallest of Euronext’s seven exchanges, after Lisbon.
The company has a record 212 IPOs on all Euronext markets in 2021 and 83 IPOs in 2022. The situation is very different from nine years ago, when Ireland-based life sciences investment firm Marin raised €330 million in Dublin in 2021. He is one of Europe’s largest biotech IPOs.
Consultancy Grant Thornton warned in a report on the future of the market in July last year that Ireland was at a “pivotal moment”.
“Without action, the number of delistings could continue to outnumber new listings.” This posed a “particular threat to the Irish economy, where the stock market can make a significant contribution to employment, economic growth and government tax revenue”.
Grant Thornton recommended creating a “cornerstone” investor in the Dublin market, usually a large institution that agrees to buy a large stake as part of a company’s IPO.
Mr Byrne also called on the government to introduce something similar to the UK’s personal savings accounts to encourage retail investment, as well as tax incentives for corporate IPOs.
Martin Toomey, chief executive of brokerage firm Goodbody, said there were still suitable IPO candidates and capital to raise in Ireland.
However, he added, “It’s no exaggeration to say there’s a lot of soul-searching going on at this point.”
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