The reintroduction of mortgage interest relief for investors buying second properties could cost the Exchequer £40 million (€50.8 million) in lost tax revenue.

Papers just released by the Department of Finance calculate the cost on the basis of the number of property investors in the market when mortgage relief was last available in 1998.

Other documents produced by the Tax Strategy Group raise the possibility that the Government has been advised to legislate in the forthcoming Finance Bill to tighten up on EU state aids for development.

Blanked-out sections in the paper on EU state aids could indicate that new procedures for claiming capital allowances or restrictions on capital allowances in rural renewal, holiday homes or other tax-based development schemes are planned for the February bill.

A partially withheld paper regarding capital gains tax on compulsory purchase orders on farmland could indicate that the Finance Bill will include special provisions for farmers selling land for the roads network under the National Development Plan.

The Tax Strategy Group is an interdepartmental committee chaired by the Department of Finance, and comprising senior officials and advisers from the Departments of Finance; Taoiseach; Enterprise, Trade and Employment; Social, Community and Family Affairs; and the Revenue Commissioners. The group prepares various options for the budget and for the medium and longer term.

Its Budget 2002 papers released yesterday covered infrastructural issues including an assessment of public private partnerships (PPS), income tax, PRSI, the Business Expansion Scheme, tax compliance and pensions including Personal Savings Retirement Accounts.

Papers withheld or partially withheld included those on employee share options and gainsharing - changes expected in these areas in the Budget failed to materialise - corporation tax issues, and renewable energy. Items in papers on VAT issues and Revenue powers were withheld.

A detailed paper on tax compliance sets out how the Revenue picks cases for audit. One tax practitioner said it was the first time he had seen such an extensive written explanation on how cases were chosen.

The actuarial review of the Social Insurance Fund referred to in the papers will be completed within "a couple of months", according to a spokeswoman for the Department of Social Community and Family Affairs. The review of the Fund 2001-2056, which was commissioned by the Minister, was expected in October but has been delayed, she said.

A Tax Strategy Group paper sets out the criteria given to the consultants commissioned after a competitive tendering process to carry out the first full review of the Social Insurance Fund.

It states "the primary purpose of the review is to inform both short/medium and long-term policy development in relation to the social insurance system generally".

The actuaries have been asked to work out if and how the amount of any current or future Social Insurance Fund surpluses could be determined.

On the Business Expansion Scheme, a paper shows the Department of Enterprise, Trade and Employment sought an extension of the scheme before Budget 2002 and told the Department of Finance that it considered the then ceiling for investment in any one firm of €317,500 sufficient to support the needs of small/new enterprises.

In the Budget, the Minister for Finance increased this ceiling to €750,000.

The Tax Strategy Group Papers can be read on the Department of Finance website: www.irlgov.ie/finance.