Finance Department unable to guess cost of tax breaks

THE Department of Finance said yesterday it was unable to estimate how much extending property-based tax breaks until 2006 will cost the State.

In response to a query from the Irish Examiner yesterday, the department could only supply an estimate for one of the 10 schemes, but it could not yet determine how the cost to the Exchequer of the other major schemes, including urban renewal, holiday homes and car parks.

Green Party spokesman Dan Boyle responded to the admission by saying Minster for Finance Charlie McCreevy may expose the Exchequer to a revenue black hole that could run into hundreds of millions.

“That is the most frightening aspect. They are being allowed to continue with a tax relief that favours property owners.

“A year after the minister announced he was abolishing the relief, he has now extended it and is approaching it with an open cheque book. The costs aspect is frightening.”

In Wednesday’s budget, Mr McCreevy announced he was extending the end dates of 10 property-based tax incentives from the end of 2004 until 31 July, 2006, but did not provide a figure for the estimated costs.

However, unlike the extension of film tax reliefs, which will cost the Exchequer 25 million per annum, Mr McCreevy made no estimates as to the cost of extending other reliefs. A recently-published report by the Revenue Commissioners, which studied the tax returns for the country’s 400 top earners, showed that some had substantially reduced their tax bills by investing in property-based schemes.

Members of this elite group had avoided paying over 68 million in tax by investing in hotels, car parks and other properties.

In last year’s Budget, Mr McCreevy said he was terminating most major tax reliefs from the end of 2004.

On Wednesday, he criticised the reliefs for narrowing the tax base, for being inequitable and for lowering the tax bills of those in higher income brackets.

However, he justified the decision to extend the end date, saying he was aware of a “range of construction projects which will be seriously affected by this termination date”.