Financial Resolutions 1998. - Financial Resolution No. 6: Income Tax
(1) THAT the Taxes Consolidation Act, 1997 (No. 39 of 1997), be amended by the insertion of the following sections after section 409:
Income tax: restriction on use of capital allowances on certain industrial buildings and other premises.
409A. —(1) In this section—
‘active partner', in relation to a partnership trade, means a partner who works for the greater part of his or her time on the day-to-day management or conduct of the partnership trade;
‘partnership trade' and ‘several trade' have the same meanings respectively as in Part 43;
‘specified building' means—
(a) a building or structure which is or is to be an industrial building or structure by reason of its use for a purpose specified in section 268(1), and
(b) any other building or structure in respect of which an allowance is to be made, or will by virtue of section 279 be made, for the purposes of income tax under Chapter 1 of Part 9 by virtue of any provision of Part 10 or section 843,
but does not include a building or structure which is or is deemed to be an industrial building or structure by reason of its use for the purposes specified in paragraph (d) of section 268(1).
(2) Subject to subsection (5), in relation to any allowance to be made to an individual under Chapter 1 of Part 9 for any year of assessment in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building, section 305 shall apply as if in subsection (1)(b) of that section the first-mentioned reference to the excess were a reference to the excess or £25,000, whichever is the lower.
(3) Subject to subsection (5), where—
(a) any allowance or allowances under Chapter 1 of Part 9 is or are to be made for a year of assessment to an individual, being an individual who is a partner in a partnership trade, in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building, and
(b) that allowance or those allowances is or are to be made in taxing the individual's several trade,
then, unless in the basis period for the year of assessment in respect of which that allowance or those allowances is or are to be made the individual is an active partner in relation to the partnership trade, the amount of any such allowance or allowances which is to be taken into account for the purposes of section 392(1) shall not exceed an amount determined by the formula—
A + £25,000
where A is the amount of the profits or gains of the individual's several trade in the year of loss before section 392(1) is applied.
(4) Where an individual is a partner in 2 or more partnership trades, then, for the purposes of subsection (3), those partnership trades in relation to which the individual is not an active partner shall, in relation to that individual, be deemed to be a single partnership trade and the individual's several trades in relation to those partnership trades shall be deemed to be a single several trade.
(5) This section shall not apply to an allowance to be made to an individual under Chapter 1 of Part 9 in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building where—
(a) in the case of construction, the foundation for the specified building was laid in its entirety before the 3rd day of December, 1997, or
(b) an application for planning permission for the work represented by that expenditure on the specified building had (in so far as such permission is required) been received by a planning authority before the 3rd day of December, 1997, and that expenditure is incurred under an obligation entered into by the individual in relation to the specified building before—
(i) the 3rd day of December, 1997, or
(ii) the 1st day of February, 1998, pursuant to negotiations which were in progress before the 3rd day of December, 1997.
(6) For the purposes of subsection (5)—
(a) an obligation shall be treated as having been entered into before a particular date only if, before that date, there was in existence a binding contract in writing under which that obligation arose, and
(b) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress before a particular date unless preliminary commitments or agreements in writing in relation to that obligation had been entered into before that date.
(7) This section shall, with any necessary modifications, apply in relation to a profession as it applies in relation to a trade.
Income tax: restriction on use of capital allowances on certain hotels, etc.
409B. —(1) In this section—
‘active partner', in relation to a partnership trade, has the same meaning as in section 409A;
‘partnership trade' and ‘several trade' have the same meanings respectively as in Part 43;
‘specified building' means a building or structure which is or is to be an industrial building or structure by reason of its use for a purpose specified in section 268(1)(d), but does not include—
(a) any such building or structure (not being a building or structure in use as a holiday camp referred to in section 268(3))—
(i) the site of which is wholly within any of the administrative counties of Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo but not within a qualifying resort area within the meaning of Chapter 4 of Part 10, and
(ii) in which the accommodation and other facilities provided meet a standard specified in guidelines issued by the Minister for Tourism, Sport and Recreation with the consent of the Minister for Finance,
and
(b) a building or structure which is or is to be deemed to be such a building or structure by reason of its use as a holiday cottage of the type referred to in section 268(3).
(2) Subject to subsection (4), section 305(1)(b) shall not apply in relation to any allowance to be made to an individual for any year of assessment under Chapter 1 of Part 9 in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building.
(3) Subject to subsection (4), where—
(a) any allowance or allowances under Chapter 1 of Part 9 is or are to be made for a year of assessment to an individual, being an individual who is a partner in a partnership trade, in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building, and
(b) that allowance or those allowances is or are to be made in taxing the individual's several trade,
then, unless in the basis period for the year of assessment in respect of which that allowance or those allowances is or are to be made the individual is an active partner in relation to the partnership trade, the amount of any such allowance or allowances which is to be taken into account for the purposes of section 392(1) shall not exceed the amount of the profits or gains of the individual's several trade in the year of loss before that section is applied.
(4) This section shall not apply to an allowance to be made to an individual under Chapter 1 of Part 9 in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building where—
(a) in the case of construction, the foundation for the specified building was laid in its entirety before the 3rd day of December, 1997, or
(b) an application for planning permission for the work represented by that expenditure on the specified building had (in so far as such permission is required) been received by a planning authority before the 3rd day of December, 1997, and that expenditure is incurred under an obligation entered into by the individual in relation to the specified building before—
(i) the 3rd day of December, 1997, or
(ii) the 1st day of February, 1998, pursuant to negotiations which were in progress before the 3rd day of December, 1997.
(5) For the purposes of subsection (4)—
(a) an obligation shall be treated as having been entered into before a particular date only if, before that date, there was in existence a binding contract in writing under which that obligation arose, and
(b) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress before a particular date unless preliminary commitments or agreements in writing in relation to that obligation had been entered into before that date.
(6) This section shall, with any necessary modifications, apply in relation to a profession as it applies in relation to a trade.".
(2) THAT this Resolution shall have effect as on and from the 3rd day of December, 1997.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
The first resolution gives effect to the announcement in the Budget Statement that, as and from tonight, the cumulative amount which a company or a group of associated companies can raise under the BES is being reduced from £1 million to £250,000. Experience with the BES over the years has shown that the smaller investments give the best returns. A recent review of the BES by the Department of Enterprise, Trade and Employment revealed that a relatively small number of large projects continue to attract most of the BES money. For example, since its inception, approximately 80 per cent of all BES approvals were for amounts under £200,000 and accounted for 22 per cent of the total raised under the scheme. On the other hand, 12 per cent of approvals were for amounts of £500,000 or over and accounted for 62 per cent of the total invested.
The main conclusions of the review were that, first, the BES has strengthened the balance sheets of a significant number of small companies in the early stage of their life cycle. Second, investments of over £250,000, however, tend to be in the nature of five year loan finance rather than genuine equity capital to smaller firms, which is what the BES is about. The reduction in the amount a company can raise under the scheme will, therefore, help re-focus it back to its original intention which was to assist smaller companies to raise long-term equity capital as opposed to expensive loan capital which they could not otherwise raise because of the risks involved for investors.
As with previous restrictions to the BES, transitional provisions are being put in place to cater for BES projects which were well advanced before today. The "pipeline" cases will be able to continue with their plans to raise funds under the previous limit of £1 million, provided that they comply with all existing rules of the scheme, as well as those governing the transitional arrangements set out in the Financial Resolution.
With regard to Financial Resolution No. 6, over recent years the tax system has been used increasingly through various urban renewal schemes to encourage investment in areas considered in need of investment and renewal. By and large the schemes which offer very generous tax incentives have, though costly, been successful in attracting investment to these areas. Urban renewal schemes, for instance, have transformed rundown areas of our towns and cities.
It is necessary, however, to maintain a balance between the use of the tax system as an instrument of investment policy and the use of various tax incentive schemes by high net worth individuals to shelter excessive amounts of income against tax. For some time, highly tax efficient schemes have been marketed and aimed at high net worth individuals encouraging the investment of larger sums in property at little or no risk to the investor and at maximum cost to the Exchequer.
The purpose of the resolution is to restrict capital allowances available to individual passive investors on industrial and commercial buildings, including hotels. Subject to transitional provisions the restrictions will generally apply to expenditure incurred on or after budget day on such buildings including those in tax designated areas.
The restrictions are as follows:
(a) a ceiling of £25,000 per year is being introduced on the amount of capital allowances which an individual passive investor can claim against employment and other non rental income in respect of expenditure incurred on buildings other than hotels. This limit is the same as that in place already for individual investors in the case of the BES and film relief;
(b) in the case of hotels no capital allowances may be claimed by an individual passive investor against employment and other non rental income except for certain hotels in particular counties;
(c) the balance of the capital allowances not offset against the passive investor's employment and non rental income can be offset against the individual's Irish rental income from all sources either in year one or in future years.
The restrictions will, however, not affect investments made by an individual owner operator of a business or one actively engaged in the operation and management of a business for which the building is used, or investments made by individuals, including a passive investor, in three star or better hotels in counties Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo, other than in seaside resorts in those counties, or investments made by companies, including financial institutions, in any of the developments in question.
The measures are essentially aimed at individuals who are lessors of industrial buildings, hotels and all types of commercial premises, including multi-storey car parks, which attract capital allowances whether generally or under various tax incentive schemes.
I wish to tease out both resolutions. In regard to Financial Resolution No. 5 the Taoiseach stated flatly that the rate of return on investments of less than £250,000 in a given company through the BES is higher than that on larger investments. How, over what period and by whom is it measured and will he give a statistical statement with examples to bear out this assertion? It is one that on the face of it is not necessarily credible. I am not questioning the integrity of the people who prepared the report a copy of which I do not have. Is it a published report and who recommended this restriction?
I wish to comment on the evolution of the BES. I was responsible as Minister for Industry and Commerce for persuading the Minister for Finance to introduce the scheme and then I was responsible as Minister for Finance for refining it. The worst day's work ever done as far as tax incentives for industrial development is concerned, was done by my successor as Minister for Finance who expanded the scheme to include property in 1987 and 1988. It was a terrible thing to do because it was obvious that people who had assets backing their investments were not in need of a tax incentive. One was needed for people putting money into projects that were inherently risky where the asset underlying the project was the knowledge of those working and promoting it and not the physical asset. Unfortunately, in 1987 the mistake was made of extending the BES to eventually include apartments that were supposedly for tourist occupation and which were asset backed.
A further refinement has been introduced into the scheme which I regard as very objectionable. One of the canons of taxation is that there should be certainty in regard to the instance of taxation and this has been identified by Dalton and others who have written on the topic. There is no certainty about the instance of this tax relief because the resolution sets out a system whereby one quango or another has to be applied to decide whether one qualifies for a tax incentive.
There is no way of knowing whether one qualifies for it as one must apply to a group of people sitting around a table who will decide on the basis of some consultant's report, for which a great deal of money has been paid to prepare, whether one qualifies. I am not questioning the integrity of these people but the idea that one does not know what one's tax position will be on the basis of the law as published and must rely on a third party sitting in judgment on one's case is wrong. They do not have to account for the basis of their decision. The county enterprise board or industrial development agency defined in the resolution can simply say the M. D. Higgins project is in and the Collins project is out as they do not have to explain why one is in and the other is out. That does not apply in regard to whether one qualifies for a personal tax allowance or any other tax allowances.
An aberration in this tax allowance is that it is not certain, it depends on an administrative decision. It is wrong that eligibility for a tax concession should depend on such a decision. This is not the only case to which it applies but where an administrative decision must be interposed to decide whether an individual qualifies for a tax concession that is an admission of failure by the drafters of tax policy. It should be possible to devise an abstract principle of law that can be stated in words or, if necessary, in a mathematical formula, or in some other way, on the basis of which people could decide whether they are eligible. If they do not agree with the tax inspector's decision they should have the right to appeal to somebody else, for example, an appeals commissioner. If eligibility for a tax concession is decided arbitrarily by an agency, albeit within the compass of the rules, and distinctions at the margin can be made by that agency without recourse to the rules, that undermines the whole appeals procedure and the transparency of the tax code, and that is wrong.
I am not saying the present Minister for Finance is the first Minister for Finance to have recourse to this procedure. This resolution simply reproduces and slightly modifies something that was already in our law. It is a profoundly wrong principle of tax policy in that, in the absence of certainty of interpretation as to eligibility for a particular tax concession, an administrative decision making process is imposed between the citizen and the law. Basically the citizen should have direct access to the law on the basis of what he reads on a piece of paper.
It is wrong that a certifying agency, a county enterprise board or, above all, a Minister will be deciding whether a person gets a tax concession. That is placing a Minister in an invidious position. Ministers should not have to decide whether someone qualifies for a tax concession. We have established an independent Office of the Revenue Commissioners which is separate from the Department of Finance in order that Ministers will not have to make decisions about individual taxpayers, but it appears from paragraph 5(b)(iv) of this resolution that a Minister will certify in some cases. That is wrong.
Every tax incentive for one party is, by definition, a tax disincentive for somebody else. Every tax incentive for development in one part of a town is, by definition, a tax disincentive for development in another part of the town not covered by the incentive. Any tax incentive for, say, deer farming, that is not available for ostrich farming is a disincentive to ostrich farming because it influences the decision on the best way of allocating resources. That is why it behoves the Minister to give a clear explanation as to why there should be a tax code affecting investment in hotels in Kingscourt and not in Kilmainham Wood, on either side of the Cavan-Meath border.
There are other examples. The Minister from Westmeath is absent at the moment, but one can get a tax concession for a hotel on one side of the Shannon in Athlone and not for one on the Westmeath bank of the river. One can get a tax concession for a hotel where the former Taoiseach, Deputy Albert Reynolds, originated, but not for a hotel where he now lives. In other words, one can get a tax concession for a hotel in Leitrim but not for a hotel in Longford. What is it about Longford that there is no concession to be got for a hotel there? Are there too many hotels in Longford and too few in Cavan and Roscommon? County Meath has a serious problem in that there is no hotel that is big enough to accommodate coach tours. People visiting the various monuments of the Boyne, Trim and other areas must do so as day trippers if they are travelling on a bus; they cannot stay overnight in the county because there is no hotel that is big enough to accommodate them. The Minister for Finance is creating a disincentive to building a hotel in Meath because an incentive to build a hotel somewhere else in the same vicinity is, by definition, a disincentive to doing so.
Why has the Government decided that there should be a disincentive to building hotels in Longford, Louth, Meath and Westmeath? What is it about these counties that they do not need hotel development, and what is it about the other counties that they do? Perhaps there are good grounds for this distinction, but I would like to know what they are. It is not a decision that should be made arbitrarily on the basis of the Government wanting to get a Dáil seat somewhere. Obviously the Minister for the Environment was asleep at the Cabinet table because County Meath was not mentioned. Galway has been left out. Clearly the Minister for Public Enterprise was asleep at Cabinet because Westmeath has been left out. Also left out are Clare, north and south Kerry, all of Munster and the south-east, which feels neglected as far as hotels are concerned. There are many places in Ireland where there is insufficient hotel accommodation, but in a very arbitrary way, it has been decided that there should be a disincentive to hotel building in all of those other remote parts of Ireland.
I agree with the Government that perhaps there should be a disincentive to building hotels in large towns, and perhaps we should have had an abstract criterion that no incentive would apply within so many miles of towns with a certain population, but that it would apply outside that area or in smaller towns. Taking whole counties and creating incentives for them does not make sense. That arbitrary distinction needs to be explained. I have asked the Taoiseach a number of specific questions about the BES. I hope each one has been separately noted because I would like an answer to each.
What study has been conducted to justify this choice of counties? Which tourism authorities were consulted in drawing up this list which excludes Longford, Meath, Galway and Westmeath, for example, as counties contiguous to ones That were included? How long is it intended to maintain the discrimination between these counties and other counties in so far as hotel accommodation is concerned? How many hotel bedrooms are there in each of these counties per head of population? Does the ratio of hotel accommodation to the overall population justify this selection of counties? Will the Taoiseach give the equivalent ratios for excluded counties such as Meath, Longford, Westmeath and Galway? Is there statistical evidence to show there are fewer beds per 10,000 of population in the counties included to justify the discrimination against the counties which have been excluded?
I sincerely hope this measure has been thought out properly. We should not introduce willy-nilly, arbitrary forms of partition in tax application. This is a new form of partition as far as hotel accommodation is concerned. We are partitioning the State for hotel accommodation and the Border is now at Kingscourt. There has been much oratory and blood expended in the argument about partition in other aspects of life. The Government is introducing partition tonight and the reasons behind it need to be explained and justified.
Deputy Bruton has tremendous experience in the area of taxation. However, he spent too much time in the Department of Finance as he is now a captive of what used to be called the "Finance mentality".
I did not spend half enough time in the Department of Finance.
There are others who might disagree with Deputy Bruton.
The decision to reduce the level of funding which can be raised under the business expansion scheme to £250,000 is prudent and represents a return to the initial intention of the scheme. There are good reasons for reviewing schemes after four or five years to see if they have fulfilled their purpose. This is the reason behind this decision.
Deputy Bruton introduced the concept of partition when referring to tax incentives. The reality is that every tax incentive package must, by definition, discriminate against one area and in favour of another. Otherwise, it would be patent nonsense. If we adopted the principles enunciated by the Deputy we would wipe out a huge number of schemes introduced to discriminate in favour of certain areas in an effort to bring them up to the same level as other areas.
If there is any validity in the points made by the Deputy it is the suggestion that we should be given more details on why these counties were selected. There is some merit in that argument. I listened attentively to the Minister for Finance. While I never expected my ex-colleagues in the Department of Finance to show a great deal of creativity in these matters, I remind them that the Slieve Russel Hotel in Cavan can accommodate more than a bus load of tourists.
It is necessary on occasion to discriminate in favour of certain areas. Deputy Bruton made a very good case for discriminating in favour of County Meath which has many advantages but does not have a large hotel. I welcome the scheme under which tax incentives are given for the building of hotels of a certain standard. However, the Minister should look at the criteria governing it in the coming weeks. Wicklow has huge potential in terms of tourism but it does not rank very high in the minds of the officials in the Department of Finance. I discussed the seaside resorts scheme with some of them recently. I will say more about this tomorrow. Many counties are being denied the opportunity to attract and retain tourists because of a lack of hotels. There are some superb hotels in Donegal. This is partly due to the magnificent effort put in by the McNiff brothers over many years.
There is a fundamental flaw in Deputy Bruton's argument. He asked if it was prudent, proper or wise to have a certifying Minister. I cannot think of anything more appropriate than having a certifying Minister involved in the designation of some of these areas. We have reached the stage where the public trust practically everybody except politicians. In spite of their warts, inability and the many sins they have visited on the State, politicians have to do one thing bureaucrats do not, they have to present themselves every so often to the public who make a judgment on them. The suggestion that one should not have a certifying Minister for some of these schemes is patent nonsense.
There is another reason I say this. One of the proud boasts of the previous Administration, in which Deputy Bruton played no small part, was that it introduced a number of very good schemes, including the seaside resorts scheme which gives the Minister a certification role. I said at the time it was an innovative and marvellous scheme and I hoped politicians would be able to persuade the people in the Department of Finance who wanted to terminate it to have sense. The principle governing that scheme is the same as the one governing this scheme, the concept of a certifying Minister and agencies. I do not understand Deputy Bruton's argument. We must give Deputy Quinn credit for introducing this scheme when he was in the Department of Finance.
I welcome the scheme in that it focuses some of the capital available for investment specifically on areas where it is needed. The only problem I have with it is that Wicklow is not included. Other Deputies have similar problems with it because their constituencies are not included. Maybe I will be able to twist the Minister's arm during the next few days. I do not understand Deputy Bruton's argument as some of the principles enunciated, particularly in Financial Resolution No. 5, governed some of the more innovative schemes introduced by his Administration. Why is he speaking against them now when he was in favour of them when he was in Government?
I listened with great interest to the Taoiseach and Deputy Bruton. I very much support a fundamental examination of the reasons for the departure from the original purpose for which the business expansion scheme was introduced. It was suggested at the time that the scheme would enable dead money, so to speak, to be invested in projects which might not otherwise go ahead. I welcome the direction in which the Taoiseach is moving. I listened with great care to his phrase that the Minister for Finance was moved to draft this resolution on the basis of advice that the risk and the cost to the Exchequer had maximised, but that is not the sole reason the BES should be considered. For example, because of the general taxation principles, if one takes the position of people at different levels of income in society, not only is there a much greater net benefit in the budget as one goes up the income ladder but the opportunities for managing tax avoidance are maximised. I saw a profile of a person on an income of £250,000 who is able to avail of all the schemes on offer and a huge proportion of whose income is not taxable. That is tax avoided from the client's point of view, it is tax foregone from the public point of view and it is tax lost in terms of income to the State.
On the review of the business expansion scheme, when did the flow of funds move into the property market? If there is a flaw in current economic performance it is in the area of property. Speculation in property and the inflation of property values will make the economy vulnerable. If those on lower incomes, including those on social welfare and those in the middle ranges of income, are not getting the benefits they should from an economy which is working very well on the basis that it is overheating, it would not take very long to find that the flaw in the economy is property sourced.
The BES has operated for some time, particularly in regard to assets where there is no risk. That is in complete contravention to the Finance Act that introduced the scheme. It is not, therefore, a matter of reviewing the cap but the fundamentals on which the scheme was introduced. Apart from the criteria for qualification, which are very interesting, different multiples of the £250,000 can be put together to frustrate the Minister's intention in placing the cap. In addition, one can invest in leasehold property and equipment. In that regard the major banks have been running a racket for years.
When reviewing the scheme, therefore, instead of simply considering a cap, should one consider the total operation of the scheme? In regard to the much advertised business expansion schemes which will continue after this resolution is passed, what percentage will be taken by those who advertise such schemes? When I was Minister, the film scheme was subjected to close analysis by consultants. I asked that film incentives be compared with the business expansion scheme and found that the rigours forced on the film industry were not applied to the business expansion scheme. The commission and the take of some financial institutions and brokers are outrageous. The behaviour of the banks in setting up shell companies which can handle not only anonymous investment but investment which in multiples can frustrate the placing of a cap such as that suggested here, is unacceptable.
Anyone fortunate enough to have money to invest in the economy in recent years had expanded opportunities in terms of equities. There are increasing opportunities for those people to invest their money in projects that could create jobs and would have a beneficial effect on the economy. Those who have abused the scheme that was originally supposed to transfer money into positive investment to create jobs have, aided by financial institutions, invested it in assets. That has had a pernicious effect on society and made it impossible for young couples to buy their own home. It has resulted in "blind" property in practically every city and town, with nobody taking responsibility, and those involved continue to get tax benefit. After this resolution is passed a cap will be in place which reduces the figure, but this news will hardly be revealed before people will be advertising how to break up units of investment into shell companies. Perhaps we should consider the corporate aspect of this matter, set a limit and identify the beneficiaries.
In regard to hotels, the counties involved include Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo while Longford is omitted. Has the Taoiseach, the Minister for Finance or the Progressive Democrats something against Longford? It is extraordinary that while Longford-Roscommon is one constituency, one county is included while the other is omitted.
The BES, which was introduced in 1984, has been extended on an ongoing basis since then and will operate until April 1999. It covers a number of qualifying trades, including manufacturing and other activities. Deputy Bruton asked about the tax strategy group. That group asked for a review of the BES, which was undertaken earlier this year by the Department of Enterprise, Trade and Employment, based upon statistics provided by the Revenue Commissioners. That review shows that since the introduction of the scheme 13 years ago, £553 million has been invested at an estimated cost to the Exchequer of £275 million. Nearly 80 per cent of BES projects to date were in respect of manufacturing projects and the cost to the Exchequer has increased dramatically in recent years. The cost of relief in 1993-4 was £12 million whereas in 1996-7 it was nearly £42 million.
The survey shows that nearly 67 per cent of all investment since 1984 was for amounts of less than £100,000 at an estimated cost to the Exchequer of £35 million. Since 1984, 13 per cent of the total cost and nearly 82 per cent of all investment was for amounts up to £250,000 and the cost to the Exchequer was £72 million or 26 per cent of the total cost. However, nearly 12 per cent of approvals since 1984 were for amounts of £500,000 or more and the cost to the Exchequer was £170 million or 62 per cent of the total cost. The BES has been successful in helping smaller companies to raise finance and strengthen their balance sheets. The review of the BES has shown, however, that more than 80 per cent of projects have raised less than £250,000. Therefore, the reduction in the aggregate amount a company can raise in ensuring the BES is targeted at the projects is most likely to benefit the BES.
Deputy Bruton asked about the certification process and the objective criteria. There are many provisions in the tax Acts which require certification by the Government's agency and decisions are subject to administrative law. I am sure Deputy Bruton will agree, however, that not all matters can be set out in legislation by way of mathematical formula. There must be objective criteria but, as we are aware from previous legislation, when we try to do that we end up with reams of regulations and laws to close the loopholes. Deputy Higgins will remember what happened some years ago when film relief was introduced. One cannot write all the regulations into law.
Should we be doing this at all?
Somebody must make the administrative decision, whether it is a member of Bord Fáilte or somebody in the Department of Arts, Heritage, Gaeltacht and the Islands. Even though Deputy Bruton is arguing against this measure, he obviously agrees with it because last year he included the certification process for the manufacturing side which had been excluded for the previous 12 years. He obviously wanted to focus on this.
This is a bad way of doing it.
The tax regime introduced for hotels in selected counties is not an unusual measure. In the case of urban renewal, Temple Bar and the enterprise zones of Gallanstown, Ballymun and East Point, sites were ringfenced and areas outside them were not included. Many Border counties do not have adequate hotels on the Bord Fáilte list. There are no large hotels in north Leitrim which is a beautiful area from a tourist point of view. Governments in all countries intervene in the market to provide incentives for particular sectors and areas. We provided similar attractions in many of the schemes we implemented in the past.
The BES was extended to tourism and shipping ten years ago and included mainly asset-backed activities, such as hotels, guesthouses, self catering accommodation and Dublin 4 apartments. However, they were removed from the scheme in l991.
Acting Chairman
As it is now 10.30 p.m. I am required to put the following question in accordance with an order of the Dáil of this day: "That Financial Resolution No 5 is hereby agreed to".
Question put and agreed to.
Acting Chairman
I am required to put the following question in accordance with an order of the Dáil of this day: "That Financial Resolution No. 6 is hereby agreed to."
Question put and agreed to.
