Dáil Éireann debate -
Tuesday, 21 Oct 1997

Vol. 481 No. 7

Written Answers. - Capital Allowance Scheme.

Michael Ring

Question:

175 Mr. Ring asked the Minister for Finance if he will introduce a capital allowance scheme which would encourage large scale hotel investment, that is, 50 per cent depreciation allowed in year one with a rate of 25 per cent per annum in years two and three in areas outside of Galway city, Salthill, Westport and Clifden. [16813/97]

Minister for Finance (Mr. McCreevy)

Since 1988 accelerated capital allowances have been significantly curtailed as part of the reform of corporation tax aimed at broadening the base and reducing the main rate. Much progress has been made in this regard with the standard rate now at 36 per cent compared with 50 per cent in 1988.

The Government is committed to building on this progress by providing further substantial reductions in corporation tax over the coming years with the aim ultimately of bringing in a single low rate for all trading activities. This will be of major benefit to the tourist sector, allowing enterprises such as hotels to retain more profits for re-investment and to generate more employment. In order to achieve this goal, it will be necessary to keep a tight rein on reliefs in the years ahead, particularly accelerated capital allowances which can be very costly to the Exchequer.

I should emphasise that the existing capital allowances for hotels, at 15 per cent per annum — 10 per cent in year seven — compare favourably with allowances of just 4 per cent per annum for industrial buildings generally.

Furthermore, as the Deputy is no doubt aware, parts of Westport and Salthill are included in the pilot tax relief scheme for certain resort areas which has very favourable capital allowances for hotels, with up to 75 per cent or 50 per cent allowances in year one and an annual allowance of 5 per cent thereafter. This pilot scheme, which runs until 30 June 1998 is currently being reviewed by the Department of Tourism, Sport and Recreation, the Revenue Commissioners and my Department.