John Deasy (Waterford, Fine Gael) | Oireachtas source

I wish to deal with Part 5, a large portion of which is concerned with commercial rates. During the past three or four months we have been dealing with this matter at the Committee of Public Accounts, along with the Departments of Public Expenditure and Reform, Finance, the Environment, Community and Local Government and the Valuation Office. As a result, myself and Deputy Robert Dowds intend to jointly table amendments to the section dealing with commercial rates. We held a series of public meetings and private meetings with officials. We hope to explain, beginning today, what changes we believe need to be made in the commercial rates section of the Bill.

In May this year I raised the issue of commercial rates under a Topical Issues debate with the Minister. At the time, the Minister referred to the harmonisation of annual rates and valuation between different local authorities. He said that his approach to harmonisation would ensure that it would not lead to any increase in commercial rates in any local authority. He stated: "There should be no increase in commercial rates in Dungarvan arising from the merger of both local authorities. If it is the will of the councillors to do otherwise, that will run contrary to my policy". Some confusion has arisen from that statement. Section 29 provides that in order to ease the transition for ratepayers to a standardised rate while avoiding a negative impact on overall local authority revenue, the harmonisation of rates will take place over a maximum of ten years. I and local authority officials and councillors realise this is a provision to spread out the negative effect of an increase in rates to avoid excessive damage to businesses. It is an explicit acknowledgement that there will be increases in the annual rate on valuation, ARV, charge between local authorities. Therefore, there is a contradiction between what has been said on the floor and what is in the legislation and that needs to be explained. Beyond clarifying that situation, the question is how the Minister intends to ensure that councillors do not act contrary to his policy, and, if they do, what steps will he take to ensure that no increases occur.

The second issue has to do with revaluations. New valuations are being placed on commercial premises through the country. In many cases businesses will be unable to absorb the increases. This has been raised again and again in the past four or five months. One of the amendments Deputy Dowds and myself intend to table would allow a local authority to spread out any increase in commercial rates over several years. My understanding is that such a provision is in place in the United Kingdom and we believe it should be given consideration in this legislation. It is clearly germane to the legislation.

As I mentioned earlier, someone in the Department had the foresight to spread out the impact of harmonisation by allowing for a ten-year period of harmonisation between local authorities. However, no one has considered the impact of the new valuations, that is, one payment with one cheque in one year. It seems like an obvious step to allow local authorities to determine this themselves and, as the Minister said yesterday, to avoid any shocks to businesses. Clearly, when spreading out the increases in commercial rates to avoid a shortfall in revenue to a local authority, it would necessarily mean a spreading out of the reductions on the other side, but I reckon that would be understood by those businesses in receipt of those reductions. Put simply, this legislation cannot, on the one hand, provide a specific solution to ease the burden on a business because of a rates increase resulting from amalgamations of local authorities, while, on the other, ignoring completely the impact revaluations would have on the same businesses. Someone in the Department of the Environment, Community and Local Government thought this through when it came to the first circumstance but the second circumstance must be dealt with in this Bill. Not to do so would not make any sense. We hope the Minister can accept our wording when we table our amendments.

Yesterday, when the Minister introduced Part 5, he made extensive reference to section 31 which would standardise vacancy refunds throughout the country. The Minister finished by stating:

I am considering further how this provision will work in practice to ensure consequences other than those I intend are not realised. I will revert to this matter again as the Bill makes its way through the Houses.

That is fair enough. I am keen to know what is intended because, as it is written, it makes absolutely no sense. I and others are grappling with the rationale behind this.

At the moment in Cork, Dublin and Galway a company gets a 50% reduction in rates if the property is vacant. However, for the rest of the country it is a 100% reduction; effectively the rates are entirely written off. If this provision was written into law, it would be unworkable. I offer one example. The former Waterford Crystal factory in Dungarvan has been lying idle for approximately six years. The rates on the premises would be approximately €150,000 per year. Who exactly would be expected to pay the €75,000 rates Bill under this legislation? Is it the receiver? I doubt it, and I do not believe the local authority would get the payment in any case. If the rationale behind this is to force landlords to find tenants, then the logic is faulty. Most of the premises that are vacant in my constituency are vacant for the one reason that tenants cannot be found at any rental price since consumer spending has slumped. To be honest, it is a bizarre time to introduce something like this. It smacks of something that an official from Dublin thought up without any understanding that there is a two-tier economy in existence in the country. The wording of the provision should be deleted or changed radically to reflect reality. To reinforce my point, last week Waterford City Council announced a scheme to incentivise new tenants to occupy premises by giving them a rates holiday for several years. That approach is completely at odds with what the Department has come up with on the same issue. It is something one would expect to see in a boom period not something one would expect to see during an economic crisis.

The highest vacancy rate of 28.2% occurs in Ballybofey, County Donegal, while the lowest vacancy rate of 3.5% can be found in Greystones, County Wicklow. This is a huge difference.

I wish to make a general point above the Government's approach to commercial rates over the past six months as having dealt with it for a lengthy period, disappointingly there is a lack of appreciation of what businesses are going through, particularly in respect of all these measures and how they might affect the retail sector on high streets nationwide. I will provide an example. I have spoken repeatedly to retailers who have shut down or who are under the threat of shutting down because they are competing with online businesses. Last year, 57% of Irish Internet users made a web purchase. Recent studies indicate that online shopping has become a substantive threat to store profitability. In 2012, online shoppers in Ireland spent €3.7 billion across a range of product and service categories and this trend is growing. According to EUROSTAT, 26% of Irish Internet users have bought clothes and shoes online in the past 12 months, compared with 11% in 2008. Moreover, 43% bought travel and holiday accommodation in 2012, which was an increase from the comparable figure of 32% in 2008. The percentage of people purchasing books, magazines and e-learning materials online has increased by one third between 2000 and 2012. The percentage of people buying food and groceries online during this period has doubled. Do online businesses pay commercial rates? No, they do not. How does one expect a local betting shop, for example, to survive when it is paying increased commercial rates to the local authority while its online competitors pay nothing?

I am afraid this Bill does not take these trends into consideration and it is a case of diminishing returns because these businesses will not survive unless a different approach is taken by the Government as a whole when it comes to commercial rates. Unfortunately, the commercial rate section, as written, is inconsistent with the realities of what is happening on high streets nationwide and notwithstanding the ten-year adjustment mechanism for harmonisation that shows appreciation for the potential impact of rate increases, the commercial rates section must be completely rewritten. Although Deputy Calleary mentioned one increase, potentially there are three increases, as well as one added element, in this regard. Potentially, it is a quadruple whammy. First, there are changes to the rates refund scheme. Second, there is harmonisation of annual rates on valuation, ARVs, in some cases upward. Third, there are new upward valuations with no spreading out of the payment period and fourth, there are trends towards online shopping increasing each year. Businesses will not survive unless the Government takes all these factors into account.

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