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The head of Euronext Dublin has hit out at “bizarre” tax rules that create an “unlevel playing field” and urged reform, after a series of high-profile departures from Ireland’s stock exchange.
Irish building materials giant CRH, the most valuable stock on the small Dublin market, left in September as part of the switch of its primary listing to New York from Europe. Betting group Flutter and packaging firm Smurfit Kappa have announced they will leave Dublin this year. Drinks group Diageo, which owns Guinness, cancelled its Irish listing in May.
Daryl Byrne told the Financial Times in an interview that the exchange was determined to create the next wave of “Irish global champions that fund their growth through our markets . . . But there are a few things that are causing difficulty.”
For an Irish company that took a US listing, he said, there was an “unsustainable situation” where trading in its shares in the US is exempt from stamp duty but on the local market attracts a 1 per cent charge. “So we end up on this unlevel playing field.”
The Irish exchange became part of the Euronext group of European stock exchanges in 2018 but Byrne said the stamp duty rules put it at a disadvantage in Europe too.
He is urging the government to cut the tax and bring Ireland in line with European peers like France, which charges 0.3 per cent and Italy, which charges 0.1 per cent. The UK levy is 0.5 per cent.
“It’s bizarre . . . when you look across Europe, it’s just not compatible,” he said. “It’s a disincentive.”
The departure of CRH, Flutter and Smurfit Kappa is a serious blow to the Irish exchange: together, they accounted for 55 per cent of turnover from January to September last year, although that was partly because of traders closing out CRH positions.
CRH and Smurfit Kappa are both moving their main listing to the NYSE from London, the latter after a merger with US rival WestRock. Flutter is keeping its main listing in London for now but taking an additional New York listing. The Dublin-headquartered group said it was too complex to maintain a home listing as well.
Other firms, including food groups Greencore and Aryzta, building and plumbing merchant operator Grafton and energy and distribution firm DCC have all quit in recent years.
The government has also voiced fears that businesses including nutrition firms Glanbia and Kerry, as well as insulation group Kingspan may follow, further depleting a market that has had only six IPOs in the past six years, and just one since 2021.
Finance Minister Michael McGrath said Dublin’s delisting headaches were not unique and “EU solutions will need to be found to address the common challenges faced by EU exchanges”.
But the size of Ireland’s market, and the fact that many of its companies seek funding from bigger pools of capital in the UK and the US, makes it particularly exposed.
Brexit also left it more isolated. In the past, many Irish companies were dual listed in London and used London’s financial market infrastructure but that has stopped.
The tax rules have further hobbled the exchange’s ability to retain Irish companies quoting in the US by offering them a dual listing on its Atlantic Securities Market.
The ASM was set up in 2015 and is aligned with US regulation. But it has failed to attract a single listing, a situation that is unlikely to be reversed after tax authorities this summer refused to extend a stamp duty waiver that would have applied to Irish companies listing on the ASM.
The government said stamp duty “is kept under review by the [finance] department”. The levy raised €500mn in 2022 and even without CRH, Byrne estimated it would still bring in around €350mn.
Euronext Dublin is the successor to the Irish Stock Exchange, which was established in 1793, a year after the NYSE. Today, it is the second smallest of Euronext’s seven exchanges behind Lisbon.
Its IPO trickle compares with a record 212 listings across all Euronext markets in 2021, and 83 in 2022. It is a far cry from the situation nine years ago when Malin, an Ireland-based life sciences investment company, raised €330mn in Dublin in one of Europe’s biggest biotech IPOs.
In a report on the market’s future last July, consultancy Grant Thornton warned Ireland is at “a pivotal moment”.
“Without action, the number of delistings may continue to outstrip the number of new listings,” it said. That posed a “threat, especially for the Irish economy, where equity markets can contribute significantly toward employment, economic growth and government tax revenues”.
Grant Thornton recommended establishing “cornerstone” investors for the Dublin market, typically large institutions that agree to buy a chunk of shares as part of a company’s IPO.
Byrne also urged the government to introduce something similar to the UK’s Individual Savings Accounts to boost retail investment, as well as tax incentives for companies to IPO.
Martin Tormey, chief executive of brokerage Goodbody, said there were still suitable IPO candidates and capital to be raised in Ireland.
But he added: “There’s a lot of soul-searching going on at the moment, it’s fair to say.”
