Tax reliefs granted to property developers in the IFSC and the adjoining Docklands area are under threat, as the European Commission reviews all incentives offered since 1993.
It now looks most unlikely to grant an extension of the reliefs under the same terms, with any new property investments not likely to qualify for any special rent or rate reliefs.
The new examination came to light just days before Christmas when the Commission informed the Irish authorities that they had failed to apply for the necessary permission for urban and rural renewal schemes in 1993 and in 1995, putting in question the reliefs issued on all such schemes since 1993.
The Taoiseach, Mr Ahern and Labour leader, Mr Ruairi Quinn were the ministers for finance when the notifications should have been made.
The failure to apply for permission means that the Commission can technically apply for the retrospective removal of the tax incentive schemes since 1993 at the Customs House Docks and in other urban and renewal schemes across the State, which would involve the repayment by developers of hundreds of millions of pounds. However such a draconian move is seen as very unlikely.
The incentives are being questioned under EU state aid rules, and the clear indication now is that such generous incentives will probably not be allowed for future schemes.
The biggest threat appears to be to schemes currently under construction which have not yet been granted relief, as the authorities' application to extend the current system until the end of the year now looks to be in doubt. The Commission is still seen as likely to grant the extension, but it will probably not allow double rent reductions and rate reliefs.
Capital allowances - which allow developers to write off the capital cost - are thought unlikely to be affected but will only be allowed at the current levels. A decision is expected following the Commission meeting on January 20th.
At present, more than 400,000 sq ft of office space is under construction in the 12-acre extension to the IFSC. The largest blocks with 215,000 sq ft are to be used as the European headquarters for Citibank.
Businessmen Mr Martin Naughton Quinn and Mr Louchlan Quinn are funding the development to the extent of £50 million and the balance of £35 million is coming from the EBS. The sale and leaseback deal will provide valuable tax shelters for the investors. Other companies committed to moving into the 12-acre extension include A&L Goodbody, the US insurance company AIG and Bank of Ireland.
Sources say that the Commission is not targeting residential schemes, under which private investors got tax relief for apartment and housing purchases in designated areas. Even investors in car parks and shopping centres are unlikely to be hit, the sources believe.
In a statement yesterday, the Minister for Finance Mr McCreevy said the current discussion did not affect the 10 per cent corporation tax rate or the 12.5 per cent rate due to come into effect from 2003.
The Minister is arguing that the Commission agreed the double rent and rates relief in 1985 and again in 1990, when it failed to reply to notification sent by the Government.
Also, as recently as February 1998, the Commission granted similar relief to a range of enterprise zones in Dublin and elsewhere. At that time the reliefs were not considered to be aid, the Department noted in a statement.
Also in the melting pot are a number of future schemes to which the Commission has yet to give the go-ahead. However, sources are hopeful that these will get an all clear, with capital allowances only.
As far back as last April, the Commission decided the double rent and rate reliefs in the Docklands area were state aids rather than investment allowances. Legislation was introduced in last year's Finance Bill for an accelerated capital allowances scheme.
