Hedge funds in Dublin may become scarce themselves if Irish Revenue imposes a new tax. The Irish Independent reports that the tax agency wants to impose a levy on the heretofore untaxed “contracts for difference,” which are highly-leveraged derivative instruments on which investors can borrow up to 10 times the actual capital, and whose top users are hedge funds. CFDs, says the Independent, account for 30% of the total trading volume, close to that of London. The proposed 1% tax, which would have to be paid on every transaction, says the Irish Stock Exchange, could drive hedge funds to London. “A reduction in turnover like that, combined with CFD holders becoming sellers of stock, could create significant downward pressure on the stock market,” Adrian O’Carroll of Merrion Capital told the Independent. The paper says Irish courts may ultimately rule on the tax. In the U.K., CFD investors are exempt from tax because they never actually own shares, The Times of London reports, citing a senior Irish broker.
