Written answers

Thursday, 25 September 2008

5:00 pm

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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Question 24: To ask the Minister for Finance the steps which have been taken and those which remain to be taken, in terms of the implementation of the recommendations of Goodbody's Economic Consultants review of area-based tax incentive schemes of February 2006 and of the Indecon International Economic Consultants Review of Property based Tax Incentive Schemes of February 2006; and if he will make a statement on the matter. [31339/08]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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In his 2005 Budget Statement, my predecessor announced that a review of a broad range of tax incentive schemes would be undertaken in 2005. The review process included studies by external consultants Indecon and Goodbody Economic Consultants, as well as internal reviews by officials from the Department of Finance and the Office of the Revenue Commissioners, with the involvement of other Government Departments as appropriate. In the Budget 2006 documentation, summaries of the recommendations of the various reviews were published, and the full reviews were published by my Department in three volumes on the 6th of February 2006. The general findings and recommendations arising from the review of tax schemes were taken into account and will continue to be taken into account where appropriate in the context of the ongoing formulation of tax policy.

In Budget 2006, in line with the recommendations of the consultants my predecessor announced the termination, subject to certain transitional provisions, of the following reliefs; the urban renewal, town renewal and rural renewal schemes, reliefs for holiday cottages, student accommodation, multi-storey car parks, third-level educational buildings, sports injuries clinics, developments associated with park and ride facilities, the general rental refurbishment scheme and the special accelerated reliefs for hotels and holiday camps.

In line with the recommendations of the consultants, the tax reliefs available for private hospitals, registered nursing homes and child care facilities were retained. In addition, in Finance Act 2006 the clawback period for investors was increased from 7 to 15 years for these 3 reliefs. In the case of all new schemes introduced since the completion of the reviews in 2005 and for private hospitals that are first used on or after 1 February 2007 provision was made in the relevant legislation to provide for the full disclosure of key information to the Exchequer by investors promoters to enable the full cost and impact of the schemes to be monitored.

In Budget 2006 the introduction of a limit, with effect from 1 January 2007, on the use of tax reliefs, including certain exemptions, by high-income individuals was announced. Section 17 of Finance Act 2006 gave effect to this announcement. This measure was designed to address the situation where a small number of individuals with high incomes had been able to reduce their income tax liability to a very low level or to zero by means of the cumulative use of various tax incentive reliefs. Such individuals are no longer able to do so. This provision ensures that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than about 20 per cent on the income sheltered by such schemes.

The reviews also proposed that any new reliefs should be time limited and should, where relevant, be subject to an assessment of costs and benefits prior to their introduction. I will continue to follow this advice as far as appropriate.

The role that time-limited tax relief schemes can play in supporting public policy objectives is routinely assessed as part of the ongoing process of tax policy formulation.

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