Joan Burton (Dublin West, Labour)
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Question 94: To ask the Minister for Finance if he accepts that the inappropriate fiscal and economic policies that he has pursued, and specifically the role played by property based tax breaks in distorting investment decision making and feeding the plain vanilla property bubble, are highlighted in both the Honohan and Regling-Watson reports on the banking crisis here; if he accepts that the ongoing cost of these property based tax breaks are, as identified by him in a parliamentary reply last year, in the order of €440 million per annum; if he further accepts that the role of property based tax breaks, and other tax breaks targeted at wealthy individuals, should be included for consideration by the proposed commission of investigation into the banking collapse here; and if he will make a statement on the matter. [25969/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I have already outlined in my responses to the Regling/Watson and Honohan Reports, I accept the broad thrust of the reports' recommendations in relation to fiscal policy.

That said as far back as 2004, the then Minister for Finance announced a review of tax incentive schemes.

Three studies were commissioned in 2005 as part of this process, one by Goodbody consultants, one by Indecon Economic consultants and one internal review by the Department of Finance and the Revenue Commissioners.

Both the Indecon study and the Goodbody study recommended the termination of the schemes with a transitional extension of the expiry date for the tax incentive schemes. Indecon recommended, in most cases, a five-year extension of the July 2006 construction deadline.

In December 2005, the Minister for Finance announced the termination of most of the schemes with transitional arrangements which drew on the Goodbody and Indecon recommendations.

These transitional arrangements provided that for projects already in the pipeline where planning application conditions had been met, the 31 July 2006 deadline was extended to 31 July 2008. In addition the amount of capital allowances available would be reduced to 75% in 2007 and 50% in 2008.

Since 2006, it has been Government policy to carry out "cost benefit analysis" on major tax expenditure schemes.

I have continued the process of dismantling these tax expenditures since my appointment as Minister for Finance. In the Supplementary Budget in April 2009, I terminated the property related accelerated capital allowance schemes in the health sector. This covered Private Hospitals, registered Nursing Homes, Convalescent Homes and associated residential units as well as mental health centres. In addition in Budget 2010 I terminated the scheme for childcare facilities.

In Finance Act 2010 the restriction of reliefs measure will severely curtail the amount of tax reliefs that can be used to reduce the income tax liability of those on high incomes. It will ensure that, in addition to PRSI and levies, those with high incomes and using reliefs will have an effective income tax rate of about 30%. This measure applies to a list of specified reliefs, including property based reliefs, the use of all of which has been curtailed as a result of this change.

In relation to the fiscal and economic policies pursued by the Government, it should be noted that General Government surplus was recorded in ten of the 11 years between 1997 and 2007. Over the same period the a General Government debt was reduced from 64% of GDP to 25% of GDP in gross terms and, in net terms was closer to 14% of GDP at end-2007.

The Regling-Watson report acknowledges that the Irish economy caught up with and surpassed average EU living standards during the past decade. Despite our recent economic difficulties Ireland remains a high income country with nominal GDP per capita forecast to be approximately 29 per cent higher than the eurozone average this year. The overall level of employment still remains high and is over 35 per cent higher than it was in 1997.

In relation to the recommendations for further investigation by a statutory Commission of Investigation, it should be noted that the report by Messrs Regling and Watson distinguishes between issues that lend themselves to a formal process of investigation and issues that are, in general, less amenable to a legally-oriented process of investigation and may be more appropriate to policy review.

In this context, the Government has published a draft terms of reference for a statutory Commission of Investigation having regard to the recommendations of the preliminary reports. The Joint Oireachtas Committee on Finance and the Public Service has been invited to provide its views on the draft terms of reference and the Oireachtas will be invited to vote on a resolution approving a draft Government Order to establish a Commission by end of this month. It will be a matter for the Commission, when established, to investigate those issues set out in the terms of reference, in accordance with its powers under the Commissions of Investigation Act 2004.

In relation to those issues which the preliminary reports considered more appropriate for policy review, the Government accepts the seven key policy lessons outlined in Part IV of the report of Messrs Regling and Watson. The Government proposes to invite the Joint Oireachtas Committee on Finance and the Public Service for its views on these key policy lessons and an appropriate motion will be tabled in both Houses shortly.