Peter Mathews (Dublin South, Fine Gael)
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To ask the Minister for Finance if the economic impact report on the section 23 type relief changes proposed in the 2012 Finance Bill has been completed; if so, if the proposed changes have been passed; if he will provide details of the changes; if he will clarify if mortgage interest relief is restricted to 25% of the mortgage interest paid for the years 2012 and 2013; and if he will make a statement on the matter. [46603/12]

Michael Noonan (Limerick City, Fine Gael)
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I announced two proposals in Budget 2012 relating to “legacy” property-based tax relief schemes in line with the Programme for Government commitment to reduce, cap or abolish such reliefs which benefit very high income earners. The Department of Finance conducted an extensive economic impact assessment during the summer and autumn of 2011 relating to “legacy” property-based tax relief schemes. This involved: An analysis of all available data from the Revenue Commissioners on claims to date in respect of legacy property reliefs; An analysis of Central Bank and financial institution data in respect of mortgage arrears and defaults in the residential buy to let sector; The production of a detailed consultation paper which presented all preliminary analysis of the data from Revenue Commissioners as well as the Department’s own internal economic modelling; A six week consultation period was held to enable all interested parties to submit their views. In addition a copy of the consultation paper was provided to all members of the Oireachtas; The production and publication of a detailed economic model on how a removal of the legacy property reliefs would impact on individuals; Reviewing and analysing some 750 responses to the consultation paper; Detailed analysis of the impact on various investor types and on jobs and business in a number of economic sectors (healthcare, hotels, student accommodation).

The analysis and findings in the final report, which was published and is available on my department’s website, were reviewed and validated by the Central Expenditure Evaluation Unit (CEEU) of the Department of Public Expenditure and Reform, and by economic consultants Indecon International Economic Consultants.

Finance Bill 2012 contained two measures related to property reliefs designed to reduce the ongoing cost of these schemes to the Exchequer and to eliminate it in as short a time as possible.

With effect from 1 January 2012, a USC surcharge will be introduced on all investors with annual gross incomes over €100,000. The surcharge will apply at a rate of 5% on the amount of income sheltered by property reliefs in a given year and will be in addition to any normal USC payable on this income. This USC surcharge will apply to all investors with this level of gross income regardless of whether they invested in Section 23 type investments or accelerated capital allowance schemes.

In addition, investors in accelerated capital allowance schemes will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after 1 January 2015. Where the tax life of a scheme has ended before 1 January 2015 no carry forward of allowances into 2015 will be allowed. The delayed implementation of this measure is designed to give individuals time to adjust to the absence of the carry forward provision.

The interest restriction on residential landlords was introduced in the April 2009 supplementary budget as part of an urgent revenue-raising package aimed at stabilising the public finances. The reduction in the level at which interest could be claimed for residential rental properties significantly reduced the cost of this relief to the Exchequer. In the case of interest accruing on or after 7 April 2009 (insofar as it would otherwise be allowable) the deduction available to the landlord is limited to 75% of such interest.