The Government's attempt to get investors to spend €500 million over the next five years to supply 1,000 extra private hospital beds on the grounds of public hospitals will be mostly paid for by the taxpayer, it was argued last night by Fine Gael deputy leader Richard Bruton.
Following changes made in the 2002 budget, investors can write off the entire cost of the construction or refurbishment of private hospitals over a seven-year period against their tax bills using accelerated capital allowances.
"The proposed new hospital beds will attract a subsidy of €190,000 per bed through tax relief," said Mr Bruton, who urged Minister for Health Mary Harney to reconsider the plan.
Under her programme announced on Thursday, beds in public hospitals currently occupied by patients covered by private health insurance would be freed up by the construction of the new hospitals.
To qualify for accelerated tax relief, private hospitals must have more than 70 beds, be able to provide medical or surgical services all year round, be equipped with operating theatres and out-patients' clinics.
Each must be able to provide at least five specialist services ranging from accident and emergency to oncology and cardiology, while 20 per cent of the beds must be available to public patients at 10 per cent below the fee charged to private patients.
The tax write-off was included in the 2002 budget by former minister for finance Charlie McCreevy following an approach from one of his constituents who wanted to build a private hospital in Co Kildare.
Fearful of criticism that the Government was favouring property developers, the accelerated capital allowances were tightly subscribed, with property developers, companies, trusts and existing hospital employees deemed "excluded categories" - effectively leaving only syndicates of wealthy investors.
The 2003 Finance Act extended the tax write-offs to private hospitals providing acute services on a day-case base, though it must provide 40 such beds as well as the other services to qualify.
Up until April 2004, a syndicate was barred from qualifying from the tax reliefs if any one of its number was a member of an excluded category.
After April 2004, every member of a syndicate, bar the excluded person, could qualify.
Investors will be able to use accelerated allowances to write off against tax bills due on unlimited rental income and up to €31,750 of non-rental income, according to an Institute of Taxation handbook.
"There will be no A&E department. Instead, the easy routine work is merely being moved to the private sector. According to investment promoters for these projects, the generous tax relief means 'it is expected that every €75,000 invested will yield a cash profit of €62,760'.
"This will go to high-income earners, particularly those with large rental incomes. The whole proposal is being presented as a hugely attractive property deal. Let us not forget the lessons of the Beaumont Hospital car park."
Designed as a joint venture between the Dublin hospital and investors, the car park eventually cost the State €13 million more in tax reliefs than it would have cost if it had built the car park itself.
"This latest deal from the Tánaiste needs careful scrutiny to prevent a repeat performance," Mr Bruton said.