Vol. 564 No. 5
17 Mr. Howlin asked the Minister for Finance the estimated cost to the Exchequer in terms of tax foregone as a result of the amendment introduced to the Finance Act 2003 extending significant capital reliefs to the cost of building private health clinics with a minimum of 40 day beds; if he expects to receive further applications for tax reliefs in this area; and if he will make a statement on the matter.
As the Deputy is aware, section 24 of Finance Act 2003 extends the current scheme of capital allowances for buildings used as private hospitals to hospitals providing certain acute services on an day case basis. The only change made to the provision is that, in the case of a day case hospital, the minimum bed requirement is being reduced to 40 beds from the 70 bed requirement that applies generally.
The Exchequer cost of the extension of the capital allowances regime to private day care hospitals is dependent on the number and size of hospitals constructed under the scheme. As far as I am aware, there is only one such hospital planned at present. If the hospital construction cost was about €22 million, this would result in an Exchequer cost of €1.3 million per annum for a seven year period, giving a total of €9 million on the basis of a 42% marginal tax rate for the investors who would claim the capital allowances. The annual cost of €1.3 million would not commence until the hospital opened in 2004 or 2005. If one assumed that there could be in total seven such hospitals at an average building cost of € 22 million per project, this would give a total Exchequer tax cost of about €9 million per annum over a seven year period or longer, depending on the phasing of the construction of the various hospitals involved.
I expect to receive proposals for tax reliefs on a wide range of issues in any budget or finance Bill process which I consider in that context. As I indicated on previous occasions, I am a supporter of properly focused, clearly defined reliefs where the benefits of the reliefs outweigh the cost and other factors.
18 Mr. Sargent asked the Minister for Finance the tax incentives and loopholes which remain and when it is intended to phase them out.
Tax loopholes are provisions in the tax code which are exploited in a manner not intended by the Legislature in order to allow certain individuals, companies or other entities minimise their tax liability. As Minister for Finance, I have always moved swiftly to close off such loopholes when they come to my notice and will continue to do so.
Tax incentives are provisions in the tax code designed mainly to meet a need in the economy by incentivising behaviour on the part of the tax paying public. They are spread throughout the tax system and are found under all tax headings, including income tax and corporation tax, the capital taxes and indirect taxes. They take a number of forms and have different, and sometimes several, objectives. These objectives include to: encourage investment in certain activities or geographical areas, for example, the business expansion scheme, film relief and urban, rural and town renewal schemes; reduce the cost of capital and thereby encourage business investment, for example, interest relief and various capital allowances; encourage certain expenditures, for example, contributions to pensions and medical insurance; encourage saving, for example, the special savings incentive accounts; assist in reducing particular costs incurred by individuals, for example, mortgage interest relief and health expenses; assist certain individuals, or activities, for example, the Revenue job assist scheme for the long-term unemployed.
Reliefs and tax incentives, however desirable, narrow the tax base and, therefore, must be subject to ongoing review. I announced, in budget 2003, the abolition of capital allowances for investment in registered holiday cottages and the reduction in capital allowances for hotels to the rate applying generally to industrial buildings. I also indicated that a range of reliefs would not be extended beyond their end-2004 termination date. However, as I am also on the record as saying, I am a supporter of properly-focused, clearly-defined and specific reliefs. The Deputy's question would seem to suggest that all tax incentives should be phased out. I would not accept this nor would I accept that new incentives should not be introduced where the potential benefits outweigh other factors. I would like to assure the Deputy that all tax incentive schemes are kept under review, especially in the context of the annual Budget and Finance Bill process, to ensure they continue to meet the purpose or purposes for which they were introduced.
