Budget Countdown: While the Minister for Finance, Mr Cowen, is expected to signal the end of a number of controversial property-based tax incentives on December 7th, it is thought that several schemes will survive yet another budget, albeit with some modifications. This will hold particular significance for wealthy investors and property developers who have benefited hugely from such reliefs in recent times.

The success of many schemes is widely acknowledged, with the regeneration of rundown areas such as Temple Bar and the IFSC under urban renewal schemes being prime examples.

However last December, serious doubts were cast over the equity of such schemes as reports emerged of wealthy individuals who had reduced, or in some cases completely eliminated their income tax bills by availing of property tax shelters.

In the wake of these revelations, the Taoiseach Mr Ahern attempted to appease the PAYE-paying population by warning wealthy investors that "their game was up", and he indicated that Budget 2006 would be D-day for so-called "loopholes". Tax advisers, on the other hand, argued that the use of legitimate tax reliefs did not constitute tax avoidance or abuse of the system, and pointed out that hundreds of worthy projects would not have taken place without the capital of such investors.

Many non-contentious reliefs, such as mortgage interest relief and medical expenses relief, are widely used by taxpayers. But property reliefs remain more or less the preserve of very wealthy individuals with significant property portfolios, as the main attraction of most schemes is the opportunity to shelter rental income.

Mr Cowen's predecessor, Mr. Charlie McCreevy, sounded the death knell for most property and area-based tax incentives in the 2003 budget, stating that there was no justification for continuing these schemes beyond 2004. But he subsequently caved in to lobbying from the construction industry and extended many of the deadlines to July 31, 2006, in the following budget.

The general consensus is that Mr Cowen will let many of these schemes (such as those relating to hotels, holiday cottages, multi-storey car parks, park-and-ride and rural renewal in certain areas) run their course and expire on this termination date. The Construction Industry Federation (CIF) warned in its pre-budget submission that this deadline will not provide sufficient time for projects to be completed. Mr Cowen has indicated on several occasions that he is mindful of the concerns of the industry, and we may see an extension in certain cases.

Mr Cowen commented in his speech at the Fianna Fáil Ard Fhéis that "Tax incentives can make a positive contribution to development and I will be ensuring that this positive element continues to play its proper role". It is thought that this "positive element" includes urban renewal, student accommodation, and third-level facility schemes, which are likely to survive in some shape or form.

Interestingly, most of the property incentives that do not have any termination date, such as private hospital, childcare facility and nursing home schemes, relate to areas which are currently causing great difficulty to the State, and which require a huge amount of investment, so Mr Cowen is unlikely to risk abolishing these.

The exemption of stud fees is unlikely to remain in its current form as it is considered by the EU to be a state aid and anti-competitive. It is thought that a cap may be introduced which will allow small breeders to continue to benefit from the exemption. Similarly, while the artists' exemption may be modified, it is predicted that low-earners will retain their tax-exempt status.

Mr Cowen is likely to restrict the extent to which high-earners can use tax reliefs to shelter their income. He has considered various "horizontal measures" to achieve this, such as the imposition of a ceiling on the total relief which can be claimed by a taxpayer in a tax year, or a cap on the percentage of income that can be sheltered by capital allowances.

It will be interesting to see how the Minister intends to strike the balance between ensuring that worthwhile property projects attract adequate investment, and rebuilding public confidence in the equity of the tax system.