Written Answers. - Tax Reliefs.

John Perry

Ceist:

78 Mr. Perry asked the Minister for Finance the position regarding tax relief at Sligo Airport Enterprise Park; if the tax relief can be availed of by the developer provided the building is occupied by a qualifying project before 31 December 1999; his views on the extreme difficulty in getting private sector investment or achieving the successful development of the park which involves considerable commitment on the part of the airport company; if it is necessary to await receiving designation before construction work can commence; and if he will make a statement on the matter. [15342/98]

Section 340 of the Taxes Consolidation Act, 1997, makes provision for the designation by order of areas immediately adjacent to seven regional airports as enterprise areas. The airports in question are Cork, Donegal, Galway, Kerry, Knock, Sligo and Waterford. The designation order may be made by the Minister for Finance after consultation with the Minister for Public Enterprise and following receipt of a proposal from or on behalf of a qualifying company intending to carry on qualifying trading operations immediately adjacent to a regional airport.

The Deputy is probably aware that in May 1997, in the context of State Aids, the Competition Directorate of the EU Commission sought detailed information on the new tax reliefs for regional airports and new enterprise areas provided in the Finance Act, 1997. This was on foot of an article in The Irish Times publicising the new schemes. The Commission then initiated a full investigation into the enterprise areas, including those six enterprise areas developed under the 1994 Finance Act. Last December, the Commission decided to approve the tax reliefs for existing and some new enterprise areas in the context of State Aids but the decision did not cover the regional airports enterprise areas scheme. EU officials have since informed my Department that the rates relief and double rent relief will not be approved by the Commission whenever a submission is made to them seeking EU approval for tax designation at any of the regional airport enterprise areas. However, it is understood there is no objection to the provision of capital allowances. Therefore, when projects for the airports enterprise areas are approved by the Irish authorities and areas are then designated, they will be submitted to the EU Commission for approval in respect of the capital allowances.

The approval of qualifying companies to operate in a regional airport enterprise area is through a certification process involving, inter alia, Forfás and the Ministers for Enterprise, Trade and Employment and Finance. The tax reliefs comprise of capital allowances of up to 100 per cent. on expenditure incurred on the construction or refurbishment of premises used by qualifying companies.

When a project for an airport enterprise area has been approved and the area designated, the qualifying period for the relief is specified in the designating order to be made by the Minister for Finance. This is the period during which capital expenditure incurred on premises is eligible for tax relief. Under the legislation, the commencement date specified in the order shall not commence before 1 August 1994 or end after 31 December 1999. The tax relief is not available until after the area has been designated. Designation is subject to EU approval. If work commences on a project before designation, the expenditure incurred in the period before the commencement date specified in the order will not now qualify for the airport enterprise areas tax relief.
With regard to private sector investment and to achieving the successful development of the Sligo Airport Enterprise Park, this is an area where it is hoped the airport enterprise area scheme will have a positive effect. However, the constraints imposed by meeting our EU Treaty obligations in the context of State aids make it imperative that developers and airport authorities work together to find suitable projects, which will meet the requirements of the EU Commission rules.