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The Cost of Infrastructure

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Why is the State offering extraordinary returns to investors in infrastructure when it can raise finance at about 3% per annum? How can the Government justify subsidies of up to 47% by way of tax breaks to investors without securing some immediate ownership rights and, in some cases, being obliged to also pay ongoing surcharges to cover rents, fees, dividends and profits for the very same investors? It is nonsense to suggest that the State would gain from the resultant PAYE and VAT paid as it would be getting these if it financed the investment. 

At a time of steady economic growth and unprecedented low interest rates, most property-related tax incentives are completely unnecessary other than for the purpose of competing with other such schemes. Virtually no schemes were adequately costed at the outset and, even after years of operation, their costs and benefits are only now coming under investigation. A classic example of handing out large amounts of tax payers money and failing to apply any management and control.

These tax schemes are a throw back to the days of double-digit inflation, interest and unemployment rates and have no role today given the buoyancy of Exchequer returns and low public sector borrowing.  Surely, the simplest solution is to abandon all schemes so as to level the playing pitch for all investment types and stop further hemorrhaging of tax payers money. Only in truly exceptional cases should schemes be revived after full investigation. If needs be, funds could be secured by diverting some of the billion euro a year paid to the National Pensions Reserve Fund for investment in overseas infrastructure and industries. However, cynics may say that this is untouchable as it  is primarily designed to help finance the unsustainable pensions of public servants and politicians.

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This page contains a single entry by Brian published on July 27, 2005 2:24 PM.

Ministerial Gravy Train was the previous entry in this blog.

Effectiveness of Dail is the next entry in this blog.

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