Transcript Document

Strictly Confidential
Subject to change
Dolmen Butler Briscoe
Presentation by Paul McGowan
to
The Irish Charities Tax Reform Group
on
Share giving, the potential in Ireland
30 September 2003
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Subject to change
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Agenda
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Background - Irish Economy
•
Public Finance Pressure
•
Fear of loss of Revenue
•
Current Government thinking
Current Rules
•
Investing in Equities
•
Equities and charity
The market potential in Ireland
•
Size of Market & Type of investors
•
Equity versus Dividend giving
Conclusion
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A.
Background – Irish Economy
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Background
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Irish Economy & Tax Receipts

Following 10 years of extraodinary growth – circa 10% pa
Ireland is expected to grow its GDP in 2003 by 3%.

Tax receipts fall due to economic slowdown.

Corporate profits fall plus personel salary’s & discretionary bonuses fall

End of EC funding in 2002.

Increase government spending, 20% in 2002 & 15% in 2003

The introduction of benchmarking payments will further pressurise the
public finances and consequently the availability of funds or the ability of
the government to introduce new tax reducing measures.
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Background
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Irish Economy & Tax Receipts (Continued)

The Revenue commissioners and Department of Finance very cautious of
introducing new tax aleviation structures. In fact the current regime is
commited to ending all tax allowance and benefit structures eg Urban
Renewal, Capital allowances & Film funding.

Recent poor experience of special reliefs have also left negative feeling
with Revenue eg Gross Roll Up, Capital allowances
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B.
Current Tax Rules
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Current Tax Rules
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Tax Treatment

A donor, who makes a donation of assets to an eligible charity qualifies for
Capital Gains Tax (CGT) relief on the disposal.

However, the disposal is deemed to occur at a rate that gives no gain/ no
loss to the donor.

The basis of assesment covers PAYE, Self assesment, Corporation Tax
BUT

If the donation is not in CASH then it does not qualify for additional charity
donation relief as introduced in Finance Act 2001.

This relief covers cash donations over Euro 250, must not be repayable, nor
can it confer a benifit on the donor and finally must not have any
conditions attaching.
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Current Tax Rules
Subject to change
Tax Treatment - Latest developments

The ICTRG in its October 2002 submission to MOF requested that the
definition of “relevant donation” be extended to cover gifts of assets, such
as shares, securities, property and other investments.

This is the treatment in US, UK, Canada & Australia

Minister of Finance in his response resisted the proposal on the following
grounds;
a)
b)
That the issue of valuation might be disputed.
Concern that non cash donations might not come out of after tax earned
income.
Fear that tax abuse might occur where non cash items allowed eg shares in
private companies.
c)
Unfortunately for Charities, Ireland has one of the most attractive and aggressive
tax system in the western world.
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C.
Share Giving in Ireland – The Potential
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Share giving potential in Ireland
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There is very little detailed market information available. The last published
study was undertaken in 1999. The key pointers from this were as follows

Total Share owning public
500,000 people
( primarily function of Eircom)

Share holders excluding Eircom
113,000

Next largest groups
Irish Life, Canada life, First
Active, Kerry, Greencore,
Golden Vale, Waterford Foods

Average holding size
Euro 6,300

% holding more than one company
30%

Deal more than once a year
7%
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Share giving potential in Ireland
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Other Issues

Many of the holdings are linked to livelihood and disposal very unlikely

Dividends offer a more attractive initial route
 When Dividends paid the investor is asked to elect for cash or scrip.
Solution might be to get charity donation of dividend as an alternative.
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Share giving potential in Ireland
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Share Giving
 113,000 hold shares * 7% regular dealing = 7,913

7,913 * average value Euro 6,300
 Assume
a) 5% takeup
b) 1% Take up
=
Euro 49,833,000
=
=
Euro 2,491,650
Euro 498,330
Alternative
Dividend Giving
Almost all quoted companies pay dividends with election form for cash or shares
 Iseq market Capitalisation
 Average Irish company dividend
 Assume a) 5% of dividends donated
b) 1% of dividends donated
=
=
=
=
Euro 59 billion
2.6%
Euro 76 million
Euro 15.3 million
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D.
Conclusion
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Conclusion
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Negatives

Uncertain econonic time with Unfavourable tax environment

Very small share ownership pool, with many holdings linked to livelihood

Monitary value limited
Positives

Irish people have strong history of donation to charity

Irish public react positively to attractive tax schemes

As a start Public companies could be encouraged to offer a charity donation
as a dividend alternative election to cash or equity

We, in Dolmen Butler Briscoe, are prepared to provide special service if
rules change.
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