The Dublin Docklands Development and all tax-designated areas would be adversely affected by the Government imposing a £25,000 cap on individual investors' capital allowances claims, the Society of Chartered Surveyors stated yesterday.
The president of the society, Ms Ann Hargaden, called on the Minister for Finance, Mr McCreevy, to increase the cap on the capital allowances an individual can claim against non-rental income, predicting that otherwise it would have a negative impact on the construction industry.
"I do not think it has been thought through at all," she said.
She said that the availability of the allowances for syndicates of up to 13 investors was responsible for about half of the £300 million investment in the International Financial Services Centre (IFSC) and its resultant "significant employment creation".
She added that the investment in hotels and airports in designated areas around the country would be equally affected.
Mr Liam Lenehan, investment director at the auctioneering company, Hamilton Osborne King, said that property values would drop by 20 per cent or more in designated areas because builders would struggle to find investors to purchase properties.
"It could well put a stop to some major schemes in the docklands. The values are now gone so high that a decent office building costs between £20 million and £30 million, and the only way of funding that is for investors to get the tax breaks," he said. A spokesman for the docklands authority, responsible for developing 1,300 acres of designated land, was unavailable for comment yesterday.
A Department of Finance spokesman said the changes were made for tax equity reasons, aimed at individuals who had used the capital allowances scheme to reduce their tax liability. "The Urban Renewal Scheme came in in the mid-Eighties when the building sector would not have been in as good a position as it is now. It is very buoyant now," he said. He added that the property market would benefit from a reduction in interest rates when Ireland joined the EMU.
Currently, there are tax-designated areas in Dublin at East Wall and Macken Street/Grand Canal Street, in Cork at Spring Lane, Blackpool, Dublin Street, Kilnap and Fitz's Boreen, and in Galway at Westside.
Under the 1997 Finance Act, locations marked as Designated Enterprise Areas are Cherry Orchard/Gallanstown and Finglas, in Dublin, and Rosslare Harbour, Co Wexford. The main airports at Dublin, Cork and Knock and the regional airports in Donegal, Galway, Kerry, Sligo and Waterford are also areas that may be designated as enterprise areas.
