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

This section introduces a scheme of accelerated capital allowances for the construction and refurbishment of certain buildings and structures for use in the maintenance, repair, overhaul or dismantling of commercial aircraft. The tax relief, which will apply under this scheme, will commence by ministerial order and will operate for five years from the date of the order. The relief will apply not only to the hangars which are required but also to the tear-down pads and other facilities that are necessary for this sector to develop.

The effect of the Senator's first amendment would be to remove this section from the high earners' restriction, which seeks to ensure a minimum 30% rate of income tax is paid by high earning individuals. In the programme for Government, a commitment was made to reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high income earners as well as the implementation of a minimum effective tax rate of 30% for very high earners. Therefore, this is an amendment I cannot accept.

The Senator's second amendment is not entirely clear. As currently drafted, this recommendation would impact way beyond the specific capital allowance regime being introduced in this section. I will assume that he wishes the amendment to apply only in the context of this section, such that there should be no restriction on the use by investors of capital allowances against all income in respect of qualifying investments. Currently, the allowances can be set against the investor's rental income in the first instance, with sideways set-off against other income restricted to ¤31,750. To remove this restriction would not be in keeping with Government policy on the use of capital allowances applied to passive investors in various incentive schemes over the years. It would also impact upon the changes made in the Finance Act 2012, which terminated the carry forward of unused capital allowances beyond the tax life of the building. This recommendation would effectively restore the position in the property market that existed previously and caused such difficulties. As a result, I cannot accept this recommendation.

I do not know where the Senator is getting his briefing but the incentives for Shannon and other airports have absolutely nothing to do with rental income or the setting off of rental income. I do not know where his briefing is coming from but it is fiction - there is no basis to it. The incentives for development of an industry to refurbish aircraft at any of our airports, whether Knock or Shannon, is an incentive for private investors who put their money in to build hangars and ancillary facilities. It has nothing to do with the Shannon Airport Authority investing any income it might have. The rental income on rent rolls at Shannon was needed for the running of the airport and it will not be invested. In any case, it is not yet clear what the corporate structure of the new airport authority will be. In normal circumstances, as a public agency it would not be in a position to avail of tax incentives. I do not know where that briefing is coming from.

The advantage that Shannon has is that it has commenced the activity already. The second biggest Russian airline, Transaero, has just commenced refurbishing there and has taken over an Aer Lingus hangar. To develop the industry further, incentives to provide hangars and pads are needed. Whether this will work or not is, again, an open question. However, the exact same incentives apply to all the other airports. The only impediment to development in smaller airports is the length of the runway. Obviously, if one is refurbishing large aircraft, one needs the runways to be sufficiently long to fly in and fly out. Therefore, while it will not apply to the little regional airports where runways are short, the runways at Knock are quite long.

In the Dáil, Deputies from the west, from Mayo in particular, said there was a possibility of activity at Knock, which would be the dismantling of aircraft and the recycling of parts of aircraft. Therefore, the word "dismantling" was brought into this section in the Dáil to allow for that activity, which the management in Knock says it is can attract in. However, if one wants to get engaged in full refurbishment and can attract in the investment, the same rules apply whether it is Cork, Dublin, Knock, Shannon or anywhere that has a runway long enough to land the aircraft.

I hope we can develop an industry here that we did not have before. We have a huge aircraft leasing industry based in Dublin and a massive proportion of the world's leasing of aircraft is now financed out of Dublin. Again, we have certain advantages on aircraft refurbishment. If one has under-used airports with fairly open skies, one can fly in and fly out. It is like heavy industry - it is that kind of work. It would be of great benefit if it can be done.