Séamus Brennan (Dublin South, Fianna Fail)

The rural renewal scheme was introduced in the Finance Act 1998 to address some of the problems facing the upper Shannon area. It was at that stage becoming apparent that this area, with its history of persistent high emigration, poor land and fragmented holdings, was not sharing in the economic turnabout experienced from the mid-1990s in other parts of the State. The 1996 census, for example, showed that the populations of both counties Longford and Leitrim had declined while every other county in the State had shown moderate or significant increases. In contrast, since the mid-1980s a succession of urban renewal schemes had succeeded in rejuvenating many inner city areas.

In light of the success of the urban renewal schemes, the then Minister for Finance, Charlie McCreevy, decided that the concept of tax incentives for the rejuvenation of urban areas could be successfully applied to the upper Shannon area on a pilot basis and consequently he introduced the scheme in the Finance Act 1998. The areas designated for relief under the scheme included all of counties Longford and Leitrim and parts of the adjoining counties Cavan, Roscommon and Sligo. The objectives for the scheme were to reverse the pattern of continuing population decline and to promote private sector investment in the area.

The package of incentives available under the scheme is broadly similar to the reliefs contained in the other area-based incentive schemes such as the urban renewal scheme and the town renewal scheme, that is, 100% accelerated capital allowances for the construction or refurbishment of certain commercial and industrial buildings and tax relief for the construction and refurbishment of owner occupied and rented residential properties.

The rural renewal scheme is the most extensive and wide-ranging area based tax relief scheme in the State. In the other area based schemes, only certain sub-areas and sites qualify for tax relief and in most cases each of the qualifying sub-areas or sites qualify for a limited range of reliefs. In comparison, all of the qualifying areas in the rural renewal scheme are eligible for the full range of reliefs available under the scheme. This was deliberative policy aimed at rejuvenating the area.

The Senator's request follows on from those of all my parliamentary colleagues from the areas concerned who made a request to have the deadline extended in discussions with the Minister for Finance before the budget. The Minister for Finance could not accede to this request, bearing in my mind that the scheme was originally due to terminate on 31 December 2001 and has already been extended on a number of occasions since then. In the Finance Act 2000, this original December 2001 deadline was extended by an additional year until December 2002 and in the Finance Act 2002, the deadline was extended by a further two years until December 2004.

In the case of this two-year extension to December 2004, there were no qualifying conditions attached to the extended time period, as is the case for other schemes such as the urban renewal scheme, the relief for multi-storey car parks and the reliefs for hotels and holiday cottages. In effect, the scheme benefited from a straight two-year extension and was one of the few area based tax incentive schemes to do so.

In the Finance Act 2004, the deadline for incurring qualifying expenditure was again extended until 31 July 2006 where a full and valid planning application is received by the relevant planning authority on or before 31 December 2004. This latest extension to the deadline, along with a similar extension of other reliefs, was introduced to provide for an orderly winding down of the schemes and to cater for pipeline projects subject to unforeseen delays. As announced in budget 2005, the Department of Finance and the Revenue Commissioners will undertake a thorough evaluation of the effect of the various tax incentive reliefs, including the rural renewal scheme.

In this context, the Minister for Finance also confirmed to the House that the termination dates for the various schemes laid down in the Finance Act 2004 will remain unchanged. The review will evaluate their impact and operation, including their economic and social benefits for the different locations and sectors involved and for the wider community. The review will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities. As part of this review, the Minister for Finance wrote to the five relevant county managers and advised them that there will be an opportunity for their local authorities to contribute to the evaluation of the scheme as part of the process. The scheme has been a tremendous boost for the areas concerned during its long operation and I am proud that it was a Fianna Fáil Minister for Finance who introduced it.