The amendment seeks to provide accelerated capital allowances up to 100 per cent in year one for capital expenditure incurred on the provision of buses. The present capital expenditure on buses can be written off over five years at the rate of 20 per cent per annum. Taxis and cars for short-term hire are entitled to 40 per cent per annum. Since the early 1990s accelerated capital allowances have generally been phased out in a general reform of the tax system with the objective of broadening the tax base. However, prior to these reforms, at no stage were buses entitled to accelerated capital allowances.
The move in the direction now suggested would seem to be a retrograde step. There is also the significant consideration that accelerated capital allowances for buses would encourage financial institutions to become involved in the leasing of buses. This would be inevitable. Accelerated capital allowances could not, for instance, be availed of by CIE or Dublin Bus because of the lack of taxable capacity to absorb the allowances. However, financial institutions could avail of the allowances and would benefit substantially as lessors. The consequence would be a reduced tax yield from financial institutions.
There is the further consideration that measures such as this, which may be intended to provide extra bus capacity as an alternative to other forms of transport, should not be considered in isolation. A much broader view needs to be taken of the transportation area as a whole, bearing in mind the future requirements of the various competing elements in the system — in particular, that the lack of accelerated capital allowances is curtailing bus activity.
We had a lengthy debate on this matter on Committee Stage. I commend the Deputies on, at least, debating the transport issue and the deteriorating traffic in Dublin which, in addition to its economic cost, is causing stress to many people.
I recognise the bona fides of the Deputies in making their contributions and I would accede to the amendment if I could be convinced that this measure would do anything to alleviate the traffic problem in Dublin. However, I am not so inclined because I cannot see that providing free depreciation — meaning writing off the capital expenditure on buses — will do anything to alleviate the traffic problem in Dublin. It would give rise to another form of tax-based leasing which the financial institutions would take up. It would lessen the return on corporation tax from the financial institutions and, therefore, lessen the take coming into the Exchequer. That, in turn, would lessen the amount of money I could use to subvent Dublin Bus and the other services. It would be a decreasing circle.
While I am on the subject of tax-based leasing, it should be borne in mind that all the incentives, some of which I introduced myself, involve a cost to the ordinary taxpayer. People generally forget that if one approaches the Government with a proposition to spend £50 million or £60 million it becomes part of the Exchequer Vote on expenditure. People do not regard it as any loss to the Exchequer under a tax-based incentive scheme, but it is the exact same cost to the Exchequer because the tax is foregone. In all these tax-based leasing incentives, one must take into account the tax that is foregone. If we return to a system of giving free depreciation — a system we left many years ago — to help Dublin Bus, it will mean nothing to the company. This is because it does not have a taxable income in order to pay a tax liability.
Presumably, a financial institution would buy the buses and lease them to Dublin Bus or CIE because it would have sufficient rental income to offset the free depreciation on the capital allowances. The financial institution would then possibly give the lease at a lower rate to Dublin Bus or CIE. We had this debate many years ago concerning section 84 leasing and other matters, but the principles are broadly the same. I am trying to point out to Deputy Mitchell that free depreciation, or accelerated capital allowances as it is phrased in the amendment, will do nothing directly for Dublin Bus. It would have to be taken up by a lending institution that would do it in the way I have described. There would be a loss to the Exchequer, however, in that the lending institution would lower its tax burden because it would have a legitimate write off. I would end up with less money for the Exchequer while the company itself would have higher after tax profits.
This amendment will do nothing to alleviate the traffic problem in Dublin. As I outlined, there is a cost in any of these incentives and people should bear that in mind when putting forward such proposals which do not clearly show the tax cost. I outlined the cost of various reliefs in reply to a number of parliamentary questions, including a recent question from Deputy Gormley on the cost of the seaside resort relief scheme, which is also a tax based incentive. I understand he put down a series of questions on the cost of those particular schemes. He is now proposing a tax based scheme which will also involve a cost. I do not want to make a political point but the argument being made is illogical. I understand the reason Deputies put forward such arguments. It is not as clear a cost as, say, CIE getting £105 million every year.
During the debate on Committee Stage I gave vent to my feelings about the traffic problem in Dublin. I am an expert on travelling to the city centre because for the past 31 years I have travelled in from County Kildare either on the Galway or the Naas Road. For eight of those years I travelled by CIE provincial bus and I have seen many changes in that period. I have also witnessed improvements in the roads approaching the city and those in the city centre. I had to travel through various parts of the city centre during all that period towards Sheriff Street, St. Stephen's Green or Belfield and back to the other side of the city centre, but always through O'Connell Street and I have seen the traffic problem getting increasingly worse over the years.
On Committee Stage I expressed the view that this problem will not be addressed until there is gridlock in the city. Many suggestions could be put forward to alleviate the traffic problem in Dublin which could be put into effect as part of a total package but there is one obstacle in that regard — democracy. If we tried to alleviate the traffic problem in Dublin by operating a definite system from 1 January next year, there would be an outcry from various sectors. Politicians would be harried by car owners and others and it would be impossible to operate the system. This problem will not be addressed until something dramatic happens overnight, such as total gridlock in the city of Dublin. I am reminded of the film "The Italian Job", produced over 25 years ago, which involved pulling off a major scam by creating gridlock in the city.
Various proposals have been put forward from a variety of sources on how to address this problem. If they were to be put into effect there would be a degree of inconvenience for a certain period. However, people would not be willing to accept that and the Government responsible for introducing the measure would be harried by the Opposition. Public acceptability would not be forthcoming. Piecemeal solutions will not address the traffic problem in Dublin but we will not see the difficult decisions being made until something dramatic happens. I have held that view for the past 20 years.
With the Celtic tiger making gigantic leaps in recent years, there has been an increase in car ownership and the growth in prosperity will further exacerbate the problem. In regard to car ownership in Ireland, I was alarmed to hear from one of my officials before the budget that we are considerably below the UK average per 1,000 of population and even further below the EU average. Car numbers will increase and I do not know where they will be accommodated on the streets of Dublin. I gave the actual figures for car ownership on Committee Stage.
Deputy McDowell approached this problem from a different angle and there is some logic in that approach. He is not in favour of tax relief for multi-storey car parks. I understand where he is coming from in that regard and he is glad this relief is being phased out although he is not necessarily against tax relief for park and ride facilities as part of a total plan. There is little point in me putting forward the idea of tax reliefs for park and ride facilities but they should be considered in the context of a comprehensive and integrated traffic plan for Dublin.
I expressed the view on Committee Stage that, from my own survey, I have calculated that 19 out of 20 cars travelling from the suburbs of Dublin have only one passenger. If car numbers increase something dramatic will have to occur before the problem is resolved.
Deputy McDowell also raised the question of giving a direct subvention to Dublin Bus. The subvention in 1997 was approximately £105 million.
