Frank Feighan (Sligo-Leitrim, Fine Gael)
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115. To ask the Minister for Finance if he will consider a tax incentive scheme strategy or study to encourage the development of a hotel enterprise, with a minimum of 20 beds, in tourism business-dependent towns that currently do not have a hotel within their town boundaries (details supplied). [9596/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Capital allowances are currently available for hotel enterprises subject to meeting the conditions set down in the legislation. These allowances are available for industrial buildings, which includes certain buildings and structures, when used for particular purposes (including for the purposes of the trade of hotel-keeping). Generally, capital expenditure on the construction or refurbishment of these buildings qualifies for relief at a rate of 4% over 25 years. However, acquisition costs (for acquiring a site or an existing building) are not allowable for the purposes of the allowances.

In relation to the creation of new tax incentives, and as the Deputy will appreciate, decisions regarding taxation measures are usually made in the context of the annual Budget and Finance Bill process and at the appropriate time. Such decisions also must have regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. The guidelines make clear that any policy proposal which involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures, where a tax-based incentive is more efficient than a direct expenditure intervention. In relation to this final point, direct expenditure measures in relation to the tourism sector are primarily a matter for the Minister for Tourism, Arts, Gaeltacht, Sport and Media.

Our recent history with section 23 type property-based reliefs, including capital allowances for registered tourist accommodation (section 352 of the Taxes Consolidation Act 1997), suggests that an extremely cautious approach is necessary. In the past such measures were too broadly based and inefficient. They created distortions in the construction sector and were, with good reason, ended a over decade ago.