Property: Minister for Finance Brian Cowen has closed off and placed limits on the use of a range of tax exemptions to ensure that Ireland's richest citizens cannot avoid paying any tax in the future.
Mr Cowen, who said the new measures were aimed at forcing everybody to pay an appropriate amount of income tax relative to their ability to do so, has abolished many property-based tax reliefs and restricted the amount of exemptions that high earners can use to offset tax.
He announced that the urban renewal, town renewal and rural renewal schemes were to end. Special relief for hotels, holiday cottages, student accommodation, multistorey car parks, third-level educational buildings, sports injuries clinics, developments associated with park-and-ride facilities and the general rental refurbishment scheme are also to be terminated.
Mr Cowen said the date for ending 100 per cent tax relief for investment in projects that are already in the pipeline would be extended from July 2006 to December next year.
Where 15 per cent of the relevant expenditure has been incurred by that date, the relief will apply to only 75 per cent of the expenditure incurred in 2007, and will be reduced to 50 per cent up to the end of July 2008 when it will end. The Department of Finance expects the termination of these schemes will yield several hundred million euro in tax revenue.
Tax relief for investment in nursing homes, childcare facilities and private hospitals will continue. The Government also intends to reintroduce relief for investment in park-and-ride facilities and the living over the shop scheme, and will be detailed in the Finance Bill.
As well as abolishing the tax incentives used to avoid paying tax, the Minister said it was also essential to regulate the use of those that remain, so that individuals could not avoid paying any tax. "This is simply not a fair situation, although I should point out that high-earning non-payers are in a very small minority," he said.
The department recently disclosed that in 2000/2001 almost 30 people earning incomes over €1 million paid little or no tax. A further 67 people earning between €500,000 and €1 million paid tax at the marginal rate, while 10 earning that amount paid no tax at all.
The Budget introduces an overall cap on the extent to which specific incentive reliefs can be availed of by individuals earning more than €250,000 a year. The cap will restrict the amount of specified reliefs that a person can use to reduce their tax bill in any one year to 50 per cent of their income.
The Minister said this measure would help eliminate the phenomenon of "tax free millionaires".
