Investors drawn to scheme as it was so easy to grasp

The resorts scheme is unlikely to have been worth the money lost to the Exchequer in taxes, writes Mark Hennessy, Political Correspondent

Tax breaks were supposed to rejuvenate the attractions of the State's beaches for a generation weaned on cheap Ryanair flights to foreign climes.

Set up as a "pilot project" in 1996 under the rainbow government by minister for finance Ruairí Quinn, the scheme quickly grew legs.

Enda Kenny, now the Fine Gael leader but back then minister for tourism and trade, was given charge of the new scheme.

The presence of a Mayo minister at the helm probably had much to do with guaranteeing the presence of two Mayo locations, Achill and Westport.

In Westport, at least, it can be argued that much of the construction driven by tax incentives had long-term benefits, though the result is patchy elsewhere.

Even if the scheme worked, it is highly unlikely that it was worth the money lost to the Exchequer in taxes: €315 million, according to Revenue figures last week.

"This scheme attracted people into tax breaks who would never have been attracted otherwise, because it was completely simple to understand," one accountant yesterday said.

"All you had to do was go to the resort, meet the builder, buy the house, get the forms, lodge them and wait for the money.

"Most other tax breaks are only available to people with money and with good accountants. You even need an accountant to make use of the film tax breaks," he added.

The Pilot Tax Relief Scheme for Certain Resort Areas, introduced in the 1996 Finance Act, was supposed to have expired within two years.

But it was extended by Fianna Fáil and the Progressive Democrats twice, on the first occasion until June 1999 and then until December 1999, as developers queued up to get schemes on the list.

Under the rules of the scheme, investors are not allowed to stay in their properties for the 10 years in which tax exemptions are claimed.

However, investor clubs often break the rule. "They work on a very simple basis. I'll stay in your place, you stay in mine," said one source last night.

The developments spurred by the tax breaks have changed some towns, such as Kilkee, Co. Clare, almost beyond recognition.

Much of it is a ghost town out of season, and it has lost its Blue Flag award for its beach after all the houses were built. The two developments are unlikely to have been coincidental.