The planning rush

Wealthy individuals and corporate developers have been queuing up to take advantage of a variety of urban and rural property …

Wealthy individuals and corporate developers have been queuing up to take advantage of a variety of urban and rural property schemes in the month of December.

In the four days before Christmas, county council offices in Leitrim and Longford were inundated with planning applications, one of them involving a €65 million development. The pattern of last-minute submissions for the construction of housing, hotels and multi-storey car parks was replicated in other parts of the country, with planning departments receiving twice as many applications as in a normal week.

The Minister for Finance, Mr Cowen, announced a comprehensive review of tax incentive schemes in his December Budget after the Labour Party revealed that eleven millionaires had paid no tax at all in 2001, through the use of such reliefs. Hundreds of other high net worth individuals enjoyed a similar experience. Later, the Taoiseach, Mr Ahern, said the "game was up" for rich people who used such schemes to avoid tax liabilities.

A great deal of political bluster is involved here. Nine of the tax reliefs identified for review by the Government were scheduled to be abolished in July, 2006. And developers were aware that applications under the schemes had to be made by December 31st, 2004. What caused the rush was a belief that the schemes would not be extended again, as Mr Charlie McCreevy had done in 2003.

READ MORE

The Government has known the schemes were being used as tax avoidance shelters for many years. And some limited effort was made to counter abuse in the past.

In spite of that, the Department of Finance concluded in 2000 that most beneficiaries were wealthy individuals or corporate investors; that the schemes probably contributed to property inflation; and that more appropriate and cost effective ways could be found to develop particular areas. Their popularity with local communities, construction interests and wealthy individuals kept them in place.

These schemes first appeared in 1985 before the emergence of the so-called Tiger economy. Initially, they encouraged development in derelict inner city areas. Gradually, they were extended to urban and rural locations, to seaside resorts and to the upper Shannon catchment area.

Some good things were done. Investment was encouraged in deprived areas. Many schemes, however, have been blatantly abused with little proper planning. Investment was displaced from non-designated areas, producing a negative effect on competitiveness. These schemes have passed their sell-by date.