Overview: Tax savings of approximately €3 billion have been made in recent years mostly by high net worth individuals who availed of various incentive schemes promoted by the Government, according to a major review published yesterday.

In addition estimates of likely future capital expenditures in schemes where tax relief is still available indicate further savings of approximately €850 million are set to be made over the coming years.

Consultants who worked for the Department of Finance on the review criticised some of the schemes for having "very negative equity impacts".

Many of the schemes, such as the urban and rural renewal schemes, are being wound down, but the entitlements to tax breaks arising from the schemes will be drawn down for years to come, a Department of Finance briefing to journalists heard yesterday. Some schemes can deliver tax benefits for up to 13 years.

"The tail is long," said assistant secretary, Kevin Cardiff. However, he pointed out that a measure introduced in the Budget will mean high income earners will now have to pay a certain level of tax each year no matter how many relief schemes they have invested in.

While the reports do not put a value on taxes expected to be foregone in the future arising from the schemes that are to continue, estimates of likely future capital expenditure indicate the figure could be in excess of €850 million.

The Department yesterday published three separate reports into 24 tax schemes, some of which go back many years but many of which date from the late 1990s.

A report commissioned by Goodbody showed that the urban renewal, rural renewal, town renewal and living over the shop schemes will have cost €1.933 billion in taxes foregone by the end of July 2006, when the schemes are due to expire.

"The major impact on the exchequer is yet to come," the consultants added, meaning investment in the schemes "will give rise to claims for tax relief for a considerable future period".

A second report was produced by Indecon and looked at various property-based schemes such as hotel and holiday cottage schemes and allowances for investments in private hospitals and nursing homes.

It recommended that the hotels, holiday cottages and student accommodation schemes be discontinued. Tax relief for third-level educational buildings was found not to be cost-effective and an alternative policy, such as direct grant support, was suggested.

The consultants also recommended that reliefs for sports injuries clinics, multi-storey car parks, and rental refurbishment, be discontinued on the basis that they could not be justified on public policy grounds.

However they recommended continuing with reliefs for childcare facilities, private hospitals and private nursing homes, as well as for park and ride facilities.

In its recommendations Indecon said any decision on new tax incentives should be informed by a formal assessment of the likely costs and benefits. "The option of direct public expenditure as an alternative to tax incentives should be considered."

Goodbody said the Government should retain tax incentivisation as a policy tool. However, if area-based tax incentive schemes are reintroduced, it should change their structure to reduce the cost to the exchequer and their inequitable effects.

A third report, covering a range of tax schemes and completing the overall review, was compiled within the Department.