Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

We are probably at the heart of what I believe is wrong with this legislation and the valuation process. I believe we need to scrap valuation legislation and move to a self-assessment system, as is the case for all other taxes. Stamp duty has been wheeled out as not being self-assessed, but practically every other tax, including income tax, is. For most businesses, their VAT returns, their PAYE returns, their PRSI returns, their income tax returns and their corporation tax returns are all self-assessed but subject to audit, so it can be determined whether they have done anything wrong. This is the old anomaly, as we have said, going back to the 17th or 18th century, whereby a business tax is determined based on a physical asset with no reference to the value of that asset to the business. We also have the situation in which a State body or local authority applies a multiplier to arrive at a rates bill for that taxpayer. This taxation method is totally out of sync with everything in a modern society. We have two State organisations, the Valuation Office and the local authority, telling the business person what his or her tax bill is in that area. Even people who have no valuation skills compared to most business people know what their assets are worth and have a better ability to come up with a proper assessment of rates for their local property tax. I am not saying there should be a reduction in rates but that it should reflect the business environment people are in. It would be similar to all taxes. However, I know the Minister of State wants a fixed tax based on property.

I also believe it is unfair that these revaluation issues are ring-fenced from local authority to local authority. My business in Cork is not in direct competition with businesses in Killarney or Waterford, but essentially every business in Ireland is in competition with others in Ireland. There is no logic to having the rates structure linked into the local authority. If somebody came up with this system today it would not even get out of the starting blocks. The rates for businesses in Waterford are set relative to Waterford conditions, even though that business might be doing most of its business in Wexford or Cork. The concept of the local authority setting the multiplier based on a valuation does not hold from a business point of view. We are all, by and large, competing within the State, and people are exporting. To return to what I said on Second Stage, the problem is the idea that when a revaluation takes place it starts on the basis that the rates bill in that county is €10 million, and when the process is finished it must still be €10 million to make sure that the county council is looked after. That is not any way to run a business. The first priority in this current model is to look after the county council, and that is not appropriate any more.

Economic activity increases in different parts of the country. For example, I am sure the level of business activity in Kildare over the past ten or 20 years has increased enormously with the spread of business from the greater Dublin area, but the rates bill will be capped to ensure the local authority gets its figure. Business could have gone down in Offaly in the same period, but the smaller number of shrinking businesses there have to continue to give Offaly its €10 million, whether or not there is €10 million to be found. The businesses next door in Naas or Kildare are much more capable of increasing their contribution to the national rates bill. Rates should be a national tax. Ireland is too small for 31 local authorities to have different rates of tax. There is no correlation between the rates bill for a business in Kildare versus an identical business in Offaly, which makes no sense, because businesses do not stop at county boundaries. This is why I am opposed to the whole concept behind revaluation.

I did not put down an amendment with regard to my final point, but I want to raise it and discuss it. The Minister of State and his officials will be aware that some of the members met with the Irish Wind Energy Association, IWEA. We have seen examples in which, because of this ludicrous county-by-county way of doing business, the rates bill for a wind farm in Cork has gone from €6,333 per megawatt to €19,762 in the revaluation. That puts the bill at about €50,000 per turbine if the turbine produces about 2.5 MW of electricity. The same turbines in another county, depending on the rates bill payable to that county and what is required, may not have that 200% increase. A situation is building in which the exact same businesses in different counties come in with fundamentally different requirements because their councils have different financial requirements. The councils get the first slice of the cake. I know the IWEA met with the Minister of State's officials to request a reclassification of the definition of "rateable asset" for rates purposes and a removal of a significant portion of the rateable asset. I do not know the details, but the IWEA says this happens in the UK and in Scotland.

Another way of looking at this is the unfair burden of rates applying to wind energy compared to other non-renewable sources of energy producing the same amount of electricity by megawatts. There is one point that the IWEA did not take into account in its submission to reduce the rates bill by about one third. A move to a system in which one third of an asset was classified as not rateable would mean that other businesses in the county would have to pick up the tab. The total rates bill in a county is ring-fenced for the county council before we start, which is nothing to do with the value or the level of business. Even in areas of economic decline, where population and business output are decreasing but the local authority still wants its X million euro, the council will get that figure from a smaller and smaller number of businesses. It is harder for the businesses to survive. It is no wonder that in small rural towns where business is tough they are just upping sticks, packing up and moving out of the main street. The rates concept, linked to a physical asset and unconnected to the business activity, is past its sell-by date. I ask the Minister to comment on this. We are discussing this section and I believe we are getting the main debate on this issue out there. When I met members of the IWEA last week, I said to them up front that there might be a difficulty because of the mixed views on the number of wind turbines around the country, and that it would be a sensitive issue. I said that if the only exemption or rate reduction in the entire Bill was given to wind turbines, it would open up another can of worms.

I was honest enough to say it is a politically sensitive issue. They were not approaching the argument from that point of view, but it is not unconnected to the world in which we live.

I am sure the Minister of State understands my point of view on this. There must be some linkage between rates and the business that is paying those rates, but that does not happen under the valuation system.