Dáil Éireann Debate, Tuesday - 1 February 2005
13 Mr. Bruton asked the Minister for Finance if the termination dates set out in the Finance Act 2004 for various property-based schemes are subject to review under the public consultation which he has announced. [2557/05]
Amharc ar fhreagraAs I announced in my Budget Statement, my Department and the Office of the Revenue Commissioners will undertake a detailed review of certain tax incentive schemes and tax exemptions in 2005. This review will evaluate their impact and operation, including their economic and social benefits, for the different locations and sectors involved and the wider community. In addition, the review will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities.
I subsequently announced in a press release on 6 January 2005 that my Department has advertised for external consultants to review certain tax incentive schemes. Two consultancy studies are envisaged. One will examine the area-based incentives, that is, the urban renewal, town renewal, rural renewal and living over the shop schemes. The other will examine the other incentive schemes, namely, those covering multi-storey car parks, park and ride facilities, student accommodation, buildings in use for third level education purposes, hotels, holiday cottages, nursing homes, private hospitals, sports injuries clinics, child care facilities and the countrywide refurbishment scheme. The last five schemes have no termination date while all of the other schemes have a final date for incurring qualifying expenditure of 31 July 2006. This termination date was laid down in Finance Act 2004 and I indicated in the budget that the date remains unchanged.
Separate from the consultancy studies being undertaken in regard to these schemes, a special public consultation process was advertised on 8 January 2005 seeking submissions on measures that could be introduced that balance the benefit of such reliefs with the extent to which these are used by high earners to reduce their tax bill. The deadline for submissions for this process is 31 March 2005.
In signalling this review in respect of schemes that have a fixed termination date of 31 July 2006, is the Minister inviting a whole lobby group to start converging on him and Members of the House to try to extend the closing dates of relief schemes or has he made a definite decision that the closing dates mean the end of those schemes and that the review will not reopen them? There is some confusion about the Minister's intentions. He got plaudits, as did his predecessor, for announcing termination dates on schemes in an industry that has been working at fever pitch and is not in need of tax relief, as we heard today from a prominent developer in the southern region. Is the Minister opening the door again to a further extension of those dates or are they final, regardless of the review?
In respect of the existing schemes as they are currently constituted, they will terminate in 2006. That pipped the squeak, so to speak, and we saw what happened in the final months of last year when people finally got the message that there would not be a chance of another 12-month or two-year extension. In respect of existing schemes, the termination dates are fixed. I said we were not changing them in respect of the schemes as constituted.
The review we are undertaking is to determine what we can learn from all that, what is good or bad, what we would do if we were starting again and whether we should start from this position, given the current level of economic development. Those are matters for us to decide upon based on what emerges from the review. If I were to prejudge the review, there would be not much point in having it. The questions include the role for tax relief schemes in the future, if any, what areas we would consider are merited or that can give us the community benefit where we have a deficit that cannot otherwise be filled by the marketplace, public provision or whatever? As I said in the Budget Statement, the termination dates stand for existing reliefs as they are constituted. What we do in the future must be determined by the outcome of the review.
Will the Minister undertake, in regard to the consultation, to publish all the documentation because a critical issue in respect of many of these schemes, as initiated by his predecessor, is that a cost benefit analysis was not done? In the Finance Act of two years ago, the generous tax breaks available for private hospitals were initiated by a letter from a general practitioner in the former Minister for Finance's constituency, and last year there was a significant expansion of the tax breaks for existing hotel refurbishment on the basis of a short, one-page letter from the Irish Hotels Federation. If we are to make intelligent decisions on what is a difficult area, the principle of incentivising behaviour through tax breaks is not of itself wrong but this is a hidden world which is only available to the few. Will the Minister undertake to publish all the documentation, information and representations made? Does he propose that the consultative process may include public hearings?
Regarding some of the recent tax breaks initiated by his predecessor in the Finance Bill of two years ago in regard to private hospital development and nursing homes, must the development of private hospitals tie in with the Government's health sector policy? The Hanly report stated that a 300 or 400 bed local hospital is not viable yet in the tax breaks for private hospitals, and no dimensions of viability are indicated in respect of bed numbers à la the Hanly report, which is Government policy.
Those interested in making submissions may find it useful to examine the discussion documents of the tax strategy group which are available on the Department's website. Future tax strategy group documents will be available on the site also. It will be a matter for us in the first instance to examine the submissions we receive and what the review outlines. Consultants have yet to be appointed. We have advertised for them. They will report to me. The tax strategy group will consider matters. Those documents are available. It is incorrect, therefore, to state, in terms of the availability of these documents, that it is a hidden world.
My predecessor made many good decisions. If one makes a large number of decisions, one might not get everything right but one has more chance of getting matters right by doing so than by remaining paralysed by analysis, making no decisions, waiting for someone else to make them on one's behalf or waiting to see if one is in the clear politically before making such decisions. One must go with one's judgment and instincts on occasion. Analysis has a part to play but it cannot be substituted for the fact that one must sometimes make political decisions which do not meet with unanimous acclaim. We have reached the point in this country where everyone must agree with one before one makes a decision. It is as though one is doing something wrong. Ministers are obliged to make decisions. How they make them and the methodology they use is a matter for themselves. It is the responsibility of others to decide subsequently on one's judgment. That is the nature of democratic accountability. We all have our different styles and our own ways of working.
Reference was made to committees and their role. It is open to committees to organise their business in any way they wish. If they want to make a contribution to this debate during the year, they are more than welcome to do so.
I have set out my stall in terms of how I am going about my job. People can criticise me but I have decided, for the reasons outlined, to continue to operate as I have been doing and I will defend my judgment and my decision to do so. It is my intention to deal with these matters in the next budget. I intend this to be a comprehensive review in order that we will become wiser and more informed, based on the role these incentive reliefs and other reliefs have played thus far, in terms of how we should proceed. While people might not like the way decisions are taken many, if not all, of the decisions in question have a great deal of merit and have proven extremely successful. My predecessor's tenure was proof of that. Like all my predecessors, I will go about doing this job in my own inimitable way.
Does the Minister accept that before the review examines any individual reliefs, the central question must be asked as to why property based tax reliefs exist in respect of a sector of the economy that is already responsible — before one breaks down the effects of the individual reliefs — for 12% of gross national product? I put it to him that his lack of clarity regarding whether some schemes will continue is causing a corresponding lack of development in certain areas. I cite here the example of Cork city where there has been no development in the docklands areas because of an expectation among developers that either tax reliefs will be continued or that a special tax designation will be made. As a result, there is an onus on the Minister to put this issue beyond doubt once and for all.
The Deputy stated that the industry is already responsible for 12% of GNP. That is a high percentage and I am delighted the domestic construction industry is responsible for it.
It is also a result of property speculation.
No, it is because there are over 200,000 people working in the industry. These people are all working here whereas when there were downturns in the industry in the past, they were obliged to go elsewhere. I am delighted we have a buoyant construction sector and that we have twice the capital budget, in terms of a percentage of GNP, of any of our European counterparts. The latter would love to be in the same position as Ireland.
Let us not decry the fact that we have a buoyant construction sector. One of the important things we must do in the coming years is to ensure that if demand is not maintained at its current level — housing output now is 80,000 units compared with 30,000 six or seven years ago — a way to make a soft landing is found. We must ensure the construction sector continues to make a positive contribution, without there being any adverse economic impact in terms of reduced demand. That is one of the issues the economy and the Government and its successors must face. Assertions to the effect that we have had some tax incentive schemes and that the latter is a reason we should not have had them because we would still have had the same level of activity do not stand up to scrutiny.
We have reached a level of economic activity where it is timely to review these matters in order to discover whether there is a deadweight argument, whether schemes could be modified, whether there are incentives which would remain appropriate and whether there are areas of activity which would benefit from such schemes. These are issues we should not prejudge. It is timely that we should consider these various matters rather than simply adding or subtracting from the current system of schemes. If we take a comprehensive approach, it is likely that there will be a greater degree of agreement regarding the way forward. There is no point engaging in an argument which adds more heat than light to the situation.
Written Answers follow Adjournment Debate.
