Written answers

Tuesday, 20 March 2007

11:00 pm

Jerry Cowley (Mayo, Independent)
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Question 332: To ask the Minister for Finance if he will review and consider establishing a tax free status in the vicinity of Ireland West Airport Knock in view of the constant increase in passenger numbers at this airport, the importance of attracting investment to the west of Ireland and the benefits and much needed boost it would provide to the region; and if he will make a statement on the matter. [10479/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The 1997 Finance Act made provisions for a scheme of tax relief for areas adjacent to regional airports along the same lines as the relief then available under the Enterprise Areas Scheme. The scheme provided for accelerated capital allowances and double rent relief for lessees of qualified buildings. The position is that the scheme as originally announced was submitted to the European Commission for approval in 1997. However, the ensuing approval in 1998 imposed certain specific conditions i.e. that the qualifying period should end on 31 December 1999 in order to conform with the end of the then existing general regional aid framework throughout the European Union. In addition, the European Commission ruled out double rent relief in respect of any of the proposed enterprise areas adjacent to the regional airports.

The Commission also requested the Irish authorities to submit details of such airport projects to the Commission for approval by them. A total of two such projects were submitted to this Department for referral to the Commission. The first, a business park at Cork Airport was approved on 7 July 1999 and the second, a cargo handling operation at Knock Airport was approved on 26 October 1999.

Informal approval for a one year extension to 31 December 2000 in respect of capital allowances for both projects was subsequently obtained. This was on the strict understanding that no further extensions to the scheme would be sought by the Irish authorities. This understanding and recent experience of a much more rigorous examination of fiscal State aids by the Commission emphasises that it is not feasible to pursue any further extension in duration or scope of the scheme for Knock Airport with the Commission.

Jerry Cowley (Mayo, Independent)
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Question 333: To ask the Minister for Finance his views on introducing a tax designated area in the vicinity of the River Moy in County Mayo similar to that recently introduced around the River Shannon; and if he will make a statement on the matter. [10480/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The areas to be included in the proposed Mid-Shannon Tourism Infrastructure Investment Scheme are outlined in Schedule 8B of Section 29 of the 2007 Finance Bill and include all of the District Electoral Divisions that are wholly or partly within a 12 kilometre band on either side of the mid section of the Shannon. This is a pilot scheme, the operation of which will be carefully monitored and assessed and will be for a limited period only.

The reason for selecting the mid-Shannon region is that from a tourism perspective, the inner core of the country remains relatively underdeveloped. Its tourism intensity is low and it has lagged behind recent growth in tourism in Ireland which has been predominately in Dublin and certain costal counties. This scheme aims to help redress this regional imbalance and for this reason it is important that the geographical scope of the scheme should be confined to this limited area. On this basis I regret that it is not intended to extend the proposed scheme.

Photo of John PerryJohn Perry (Sligo-Leitrim, Fine Gael)
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Question 334: To ask the Minister for Finance the measures he will introduce following the Irish charities campaign to have the Government introduce a VAT compensation scheme which will save the sector close to €20 million per annum; and if he will make a statement on the matter. [10483/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The position is that charities and non-profit groups engaged in non-commercial activity are exempt from VAT under the EU VAT Directive, with which Irish VAT law must comply. This means they do not charge VAT on the services they provide and cannot recover VAT incurred on goods and services that they purchase. Essentially only VAT registered businesses which charge VAT are able to recover VAT.

The Irish Charities Tax Reform Group (ICTRG) appears to accept that charities cannot be granted VAT refunds through the tax system. However, they are still seeking the introduction of a grant or subsidy in lieu of the VAT charities pay on their business inputs and estimate that this would cost €18 million per annum in respect of the bodies they represent. However, given that Exchequer funding is made available to very many charitable organisations this is in effect already happening.

The 140 bodies represented by the Irish Charities Tax Reform Group already acknowledge that they receive some €9 million in funding either directly or indirectly from the Exchequer. However, there are approximately 7,000 charities registered with the Revenue Commissioners. It is therefore likely that the introduction of a scheme along the lines proposed by the Irish Charities Tax Reform Group would cost the Exchequer significantly more than the €18 million estimate put forward by the group in respect of the bodies they represent.

I understand that the only EU Member State to introduce a scheme providing partial compensation for a limited number of charities for VAT incurred on input costs is Denmark. To be eligible under the Danish scheme charities must already be approved bodies under the Danish equivalent of our tax relief on donations scheme. My Department understands that some 750 charities in Denmark could benefit as a result. In comparison, over 1,900 organisations have to date been approved under the Irish donations relief scheme. It also understands that under the Danish scheme educational institutions are not eligible for compensation.

It is likely, therefore, the introduction of any grant system in lieu of VAT paid by registered charities in Ireland would undoubtedly lead to other exempt bodies such as schools, hospitals and sporting organisations, many of which are already registered as charities, seeking to benefit from such a system of refunds. These exempt bodies are already receiving considerable Exchequer funding.

The tax code already treats charities in a favourable manner. The tax code currently provides exemption for charities from Income Tax, Corporation Tax, Capital Gains Tax, Deposit Interest Retention Tax, Capital Acquisitions Tax, Stamp Duty, Probate Tax, Dividend Withholding Tax and the uniform scheme of tax relief for donations.

While no overall definitive figures are available on the cost to the Exchequer of charitable tax exemption status, Revenue estimated in 2005 that the cost of the various tax exemptions and tax reliefs, including the tax relief on donations scheme, in place for bodies conferred with charitable status could be as high as €190m annually. In addition to tax exemptions and reliefs, charities, voluntary and community groups, and sporting bodies benefit significantly from grants schemes administered by a number of Government Departments.

Finally, even if funds were available for grant-aiding charities and other voluntary groups, I am not sure that the most appropriate use of the funds would be to relieve them of the VAT paid on inputs as opposed to grant-aiding their activities using other criteria.

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