TAX ALLOWANCES: Cutbacks in a range of tax allowances and shelters are to be considered as part of revenue-raising measures in the Budget, according to Government sources. This will be done in a bid to raise revenue and help hold down borrowing.
Among the reliefs to be examined are some capital allowances available to corporations and income taxpayers, and a range of schemes such as that for investment in film. Increases in indirect taxes have already been signalled, but the Government is committed to a further cut in corporation tax and to maintaining current income tax rates. Against this background, closing or restricting a range of allowances and reliefs is being examined as a way to raise funds. Sources say the Minister for Finance, Mr McCreevy, is determined to hold down General Government Borrowing (GGB), the borrowing measure used by the European Commission.
Among the tax allowances likely to be examined are urban renewal and other related reliefs for investment in designated towns and resorts. While these schemes have been tightened in recent years - meaning that they can only be used to shelter a relatively small amount of non-rental income from tax - they may be further hit on Budget day.
The Minister may also examine the scheme which offers corporations and individulas tax relief on interest payments taken out to fund investments. Mortgage interest relief for individual investors was reinstated last year, having been abolished previously and may be left intact. But the Minister could seek to raise reasonably substantial sums through restricting availability of general interest relief, particularly as it applies to business.
Other schemes to be examined are those offering relief for investment in films and possibly the Business Expansion Scheme, which offers relief for risk investments in business.
There is speculation the rate of capital gains tax may rise. Mr McCreevy had reduced this from 40 per cent to 20 per cent, but some increase is seen as possible, perhaps with a delayed implementation to encourage investors to crystallise gains and give the Exchequer an immediate cash boost.