Tom Parlon (Laois-Offaly, Progressive Democrats)

I thank Deputy Finneran for raising this matter on the Adjournment.

The rural renewal scheme was introduced in the Finance Act 1998 to address some of the problems facing the upper Shannon region. It was apparent at that time that the region, which has a history of persistent high emigration, poor land and fragmented holdings, was not sharing in the economic rejuvenation experienced in other parts of the State since the mid-1990s. The 1996 census showed that the populations of counties Longford and Leitrim had decreased, even though there had been moderate or significant increases in every other county.

Following the achievements of a succession of urban renewal schemes, which had helped to rejuvenate many inner city areas since the mid-1980s, the former Minister for Finance, Deputy McCreevy, decided that tax incentives for the rejuvenation of urban areas could be successfully applied to the upper Shannon area on a pilot basis. Consequently, he introduced the scheme in the Finance Act 1998. The areas designated for relief under the scheme included, counties Longford and Leitrim and parts of counties Cavan, Roscommon and Sligo. The objectives of the scheme were to reverse the pattern of continuing population decline and to promote private sector investment in the region.

The incentives available under the scheme are broadly similar to the reliefs in the other area-based incentive schemes, such as the urban renewal and town renewal schemes. Accelerated capital allowances of 100% are available for the construction or refurbishment of certain commercial and industrial buildings. Tax relief is available for the construction and refurbishment of owner occupied and rented residential properties. The reliefs were introduced on a phased basis. The rented residential reliefs were introduced with effect from 1 June 1998 and the owner-occupier residential reliefs were introduced with effect from 6 April 1999. The business elements of the scheme were introduced with effect from 1 July 1999, shortly after the approval under state aid rules of the European Commission was secured for the reliefs in June 1999.

It can be said with some justification that the rural renewal scheme is by far the most extensive and wide-ranging area-based tax relief scheme in the State. All the qualifying areas are eligible for the full range of reliefs available under the scheme. By contrast, only certain sub-areas of the towns and villages designated under the urban and town renewal schemes qualify for relief. Each qualifying sub-area or site qualifies for a limited range of reliefs in most cases. The entire area qualifies for rented residential or section 23 relief under the rural renewal scheme, whereas a limited number of areas or sites are designated for such relief under the urban and town renewal schemes. Those who are familiar with the areas in question can confirm that the scheme brought the benefit of enormous rejuvenation to such places. It is appropriate that we should consider the benefits during the ongoing debate about the existence and effect of tax expenditures and incentives.

While I appreciate that the Deputy is anxious for the scheme's deadline to be extended by five months until the end of 2006, he should consider that the scheme was originally due to terminate on 31 December 2001. It has been extended on a number of occasions since then. The original December 2001 deadline was extended by an additional year in the Finance Act 2000 and by a further two years in the Finance Act 2002. No qualifying conditions were attached to the extended time period in the case of the two-year extension. Such conditions have been imposed in other schemes such as the urban renewal scheme and the reliefs for multi-storey car parks, hotels and holiday cottages. The scheme was one of the few area-based tax incentive schemes to benefit from a straight two-year extension. In the Finance Act 2004, the deadline for incurring qualifying expenditure was extended until 31 July 2006 where a full and valid planning application is received by a local authority on or before 31 December 2004. This extension to the deadline, along with a similar extension for other reliefs, was given to provide for an orderly winding down of the schemes and to cater for pipeline projects that were subject to unforeseen delays.

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