Financial Resolution No. 1 of budget 2003 is an anti-avoidance measure aimed at closing off an unintended use of capital allowances by passive investors in the area of electrical generation. In recent years, I have taken action against a number of tax avoidance schemes which used tax incentives in artificial ways to reduce effective tax rates on high incomes to very low levels. For example, in the 1998 budget, I took action against "asset-backed" schemes, where individual passive investors used special incentive reliefs in relation to expenditure on certain buildings so as to reduce the tax liability on their employment income. If unchecked, schemes such as these would allow individuals with high income to avoid paying their fair share of tax to the disadvantage of the general body of taxpayers. This resolution is entirely consistent with my approach, in other instances in recent years, of ring-fencing losses and capital allowances for passive investors so that they prevent a reduction in tax on their employment income. The measure is targeted at passive investors who do not participate in such businesses in an active way. It was estimated at the time of the budget that this anti-avoidance measure would prevent tax leakage of up to €10 million per year for the next five to eight years.
The alternative energy requirement programme is the primary state support mechanism for renewable electricity generation. AER offers a guaranteed price for the power produced through a 15 year power purchase agreement with the ESB. Successful applicants are those who comply with the terms and conditions of the competition and who offer to sell the electricity to the ESB at the lowest price at or below the cap price previously notified to the market in each technology in the published terms and conditions of the competition. Five AER programmes were held since 1995. AER VI was held late last year. The total number of megawatts to be provided for by AER V and AER VI combined will be 500MW, the target of additional electricity generating capacity from renewable sources provided for in the Green Paper on Sustainable Energy.