Cardiff's intervention in taxing matter saw his stock soar in 2006
THE FREEDOM of Information Fairy can turn up the most interesting little nuggets.
This one relates to Kevin Cardiff – our man of the moment.
Stick with it. It’s complicated, but there’s a happy ending.
In March 2006, the Department of Finance reversed a move by the Revenue Commissioners to charge stamp duty on stock purchases through contracts for difference (CFDs).
Contracts for difference were hugely popular during the boom: Seán Quinn, for example, was a martyr to the CFDs. He used them to secretly build up his enormous stake in The Bank Formerly Known as Anglo, relying on heavy borrowings in the process.
A CFD punter was allowed to take a 100 per cent interest in a rising share price, while only paying as little as 20 per cent up front in cash and effectively borrowing the rest.
It looked like handy money in the go-go years, when stocks were only going one way – up!
So when Revenue introduced a stamp duty charge over the St Patrick’s weekend in March 2006, the stock exchange and financial industry were up in arms, fearing that this lucrative business, which accounted for more than 30 per cent of the market in Irish shares, would go to the UK or elsewhere.
Quelle surprise– the lobbyists got their way and Brian Cowen (then minister for finance) backed down.
Kevin Cardiff, as assistant secretary in the tax policy section in finance, came in for some heavy duty lobbying at the time.
He became second secretary general of the department the following December when he took charge of all matters relating to banking policy. (That didn’t go well.)
Before the planned duty was rescinded, Mr Cardiff sent a detailed note to Cowen about CFDs and explained why the proposal to tax them “was causing consternation in the market for Irish shares”. The minister duly noted the advice of his official and the idea was scrapped.
However, it could also have been argued that applying the measure might take the heat out of CFD-buying in Ireland.
We can say now, in hindsight, this might have slowed down Quinn’s multibillion Anglo gallop.
Then again, slapping a charge on this form of stock market gambling might have driven business across the water where the likes of Quinn may have carried on regardless.
Today, few would argue against curbing the CFD excesses. But it seems nobody in the Department of Finance was alive to the danger posed by the CFD fiesta that was raging at the time.
Still. At least the stock market people were happy.
Here’s a letter that was sent to Cardiff on March 30th, 2006 by a very grateful Tom Healy, then chairman of the Irish Stock Exchange.
“Kevin, I would like to thank you for getting the CFD problem resolved. We had the very clear impression that you were the one who fixed it.
“I will contact you soon to propose lunch.”
How lovely. A nice lunch for the man who “fixed” their little problem – and proper order too. It’s the least the stock market could do, under the circumstances. And Quinn, and all the rest, gambled merrily on.
Another job well done there by Kevin.