Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The proposed amendment is to section 21, which amends Part 16 of the Taxes Consolidation Act 1997. Part 16 deals with the employment and investment incentive and seed capital scheme.

First, the operating or management of hotels, guesthouses, self-catering accommodation or comparable establishments or facilities may now qualify under the scheme. That is the purpose of the section, namely, to extend it to the hospitality sector so that hotels, guesthouses and self-catering and other comparable establishments may be facilitated. The justification is that many hotels which are potentially profitable are unable to continue trading without some restructuring of their debts. Attracting third party investments will make it easier to achieve such restructuring. Establishments will only qualify where they are considered to have tourist traffic undertakings and as such will be required to have a three-year development marketing plan approved by Bord Fáilte. I will review the measure in two years.

Second, the scheme has been extended to 31 December 2020. The second amendment is contingent on EU approval and, accordingly, commencement is subject to a ministerial order. I have announced the extension of the time in order to provide certainty to those SMEs that may avail of the scheme. It will also facilitate the application to the EU Commission for state aid approval and receipt of such approval without any requirement to suspend the incentive.

That was my speaking note on the section. The proposal is to extend the scheme to the hotel and catering industry or hospital industry. We know that the tourism industry was significantly impaired. It had a reduction in numbers by about 30%. When we came to office one of our earlier measures was to reduce the VAT rate from 13.5% to 9% across the hospitality range of products. The industry responded very strongly and cut their own cost base significantly to the degree that tourist numbers are increasing again. In this city anyone can see that we have returned to the stage where it is difficult enough to make a reservation in a restaurant. The industry has got its cost base right, the VAT rate was reduced and today's proposal is another step in restoring the tourism industry.

All of those hotels that were built on the back of tax relief schemes, some of them did not seem to have much prospect of trading profitably. Many of the hotels which intend and continue to participate in the tourism industry are restructuring. The extension of the scheme will give them the opportunity to attract new capital to their restructuring. It is another measure to repair the tourism industry. The scheme will expire at the end of 2013. I have extended the scheme and I have also extended the date to 2020.

Deputy Pearse Doherty tabled an amendment seeking the Minister to commit to examining and reviewing the scheme in budget 2014. I shall deal with his amendment now. The new employment and investment incentive and revised seed capital scheme came into operation as from 21 November 2011. At this point I do not yet have a full year's statistics available on the impact of the incentives.

Last year I reviewed film relief. On foot of that review I have made substantial changes to the operation of film relief in the Bill. My Department has commenced a review of the research and development tax credit this year. The review will consider the design and structure of the tax credit and the contribution of research and development to productivity and growth.

The employment and investment incentive and seed capital scheme will be reviewed in due course. In my view it is too early to review it using the timeline suggested by the Deputy. I draw his attention to the ex anteeconomic impact assessment of the incentive that was completed by my officials before the new incentive was introduced. It is available on my Department's website. In addition, when introduced the incentives retain the original expiry date of the business expansion scheme of 31 December 2013. The extension of the incentive is subject to state aid approval by the European Commission. In that regard it is important that the application for the extension of the incentive be made without delay. My Department will commence the process shortly. A review would necessitate delay on such an application.

I do not consider it appropriate to include a commitment to examine and review any incentive that has a legislative base. Our reviews are normally completed as part of the annual budget and Finance Bill process. For those reasons I cannot accept the Deputy's amendment.