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

I thank the Deputy for raising the issue. The Living City initiative was enacted in the Finance Act 2013 and commenced on 5 May 2015, following discussions with the European Commission to ensure that the initiative was in compliance with state aid rules. It is worth pointing out, therefore, that the initiative has been operational for just six months.

The initial intention of the Living City initiative was to provide tax relief on the refurbishment of inner city Georgian buildings in Limerick and Waterford, both those used for commercial purposes and those that are residential homes. These types of buildings are traditionally more expensive to refurbish and inner city areas had been suffering neglect due to the relocation of homes and businesses to the suburbs.

A comprehensive independent ex antecost-benefit analysis was carried out by Indecon International Economic Consultants, which recommended, among other elements, extending the initiative to rundown areas of other cities in Ireland. Correspondingly, four more cities were included in the initiative, namely, Dublin, Cork, Kilkenny and Galway. As I have said all along, the initiative is targeting particular areas of these six cities which are most in need of regeneration and it was never intended as a widespread initiative.

The Heritage Council recently recommended in its report on policy proposals for Ireland's towns that the Living City initiative should be extended to include the historic core areas of all Irish towns where these are protected as architectural conservation areas and that the specific fiscal measures be tailored more directly to attract people to live and do business in towns. I considered potential extensions of the Living City initiative in the run-up to budget 2016 but decided not to bring forward changes at this time as this would provide uncertainty about the operation of the initiative and could encourage further demands for extensions.

I also considered proposals to provide incentives to target rural areas or towns. As has been seen elsewhere, tax breaks alone will not encourage people to live in an area where there is no work or sustainable lifestyle for them. A more integrated solution for revitalising rural areas is needed, rather than just tax reliefs. I believe direct expenditure is a more appropriate way to target support to rural areas for their regeneration.

It is also important to note that a tax relief only works if there is sufficient taxable income to obtain the benefit. A grant system, by comparison, can be fairer as it applies to those who pay low rates of tax, those who pay no tax and also higher income earners. Tax reliefs, for example, are generally not of interest to those in social housing, those who are pensioners and those who pay low rates of tax.

The Living City initiative is a targeted property incentive aimed at a specific goal: older buildings in urban areas which were neglected and deprived. Since the initiative has launched, I have received requests to extend the initiative to newer buildings, to other areas and to areas which are not as deprived within those cities. I do not think a one-size-fits-all approach can be taken when considering tax reliefs. Just because a tax relief exists, that does not mean it can or should be extended to cover other areas. I also am very conscious to take care that we do not see a repeat of the days of property-based incentives extended beyond their original target.

My officials and I are willing to consider suggestions for tax reliefs. However, I remind the Deputy of both the tax expenditure guidelines and the Department's commitment to evidence-based policy-making. Any tax incentive needs to carefully considered and used in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention.

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