Paudie Coffey (Waterford, Fine Gael) | Oireachtas source

In this context, any review of rating law, which is essentially a local taxation system, would have to include a detailed review of all extant legislation as well as comprehensive consultation with the key stakeholders, those being local authorities, ratepayers and the Commissioner of Valuation, as well as a number of other statutory bodies, including the Courts Service and the Revenue Commissioners. To introduce reforming legislation without having undertaken this essential consultation process carries a significant risk of individual aspects being overlooked or of unintended consequences arising.

While many of the provisions in the Deputy's Bill restate existing policy and procedures - for example, the striking of the rate, calculation of the annual rate on valuation and the basis of liability - it proposes notable changes to the current rates processes. Some of these raise significant legal and constitutional issues, essentially rendering the Bill unworkable. Furthermore, several aspects of the Bill are contrary to stated Government policy, particularly the treatment of vacant commercial properties. The Bill's proposals in this regard are regressive, in that they remove the local discretion and reserved power provided to elected members in the Local Government Reform Act 2014.

I shall highlight several of these matters for the Deputy. Sections 9(4) and 9(5) require the local authority to notify a landlord where his or her tenant has unpaid rates at the close of the financial year. Where the landlord has been notified and rates remain unpaid for a second year, subsection (5) provides that the landlord becomes jointly liable with the tenant for the outstanding rates relating to each year after the first where rates remain outstanding. The approach to providing joint liability in this case is unworkable. Commercial rates are fundamentally a business cost levied on the occupiers of commercial properties. These occupiers are benefiting from the services provided by a local authority, services that are funded from commercial rates charges, which create and support local economies and allow businesses to trade. It is acknowledged that the proposal may be born out of a desire to assist the local authority in the collection of rates by providing an additional mechanism to recover unpaid amounts, but the practical and legal issues of amending the basis of liability would need to be considered in detail.

The Bill restates the existing arrangements whereby occupiers are liable for rates except where a property is vacant on the date the rate is made. Where the property is vacant, it is the person who enjoys the immediate right to occupy it who shall be liable. However, the Bill repeals the existing legislative arrangements that provide that an owner may be eligible for a refund of the rate paid where the property is vacant for specified reasons. The Deputy's Bill essentially creates an exemption from rates for these occupiers or owners, which not only narrows the rates base in the first instance, but also moves away from the current policy approach - that is, to recognise that owners of vacant properties are still benefiting from the services that local authorities provide, the cost of which is funded in part by commercial rates and which make the general environment more favourable for businesses to trade.

The Bill also removes the newer approach that was given effect in the 2014 Act, namely, providing elected members with the power to respond to local commercial property markets by decreasing the proportions of refund available to eligible property owners in specific local electoral areas. The benefit of a reduced refund is to provide an incentive for the efficient use of property, but the potential to tackle the problem of vacant properties that this provides is lost through the Bill's proposals in this regard.

Deputy McGuinness's Bill proposes to exempt occupiers of rateable properties who are commencing commercial activity for the first time from one quarter of their rates liability during their first year of operation. While the Deputy's ambition to assist start-up enterprises is to be commended, what he is proposing in the Bill is unworkable. Not only could the Deputy's approach place eligible new businesses at an unfair advantage over existing ones, but state aid rules must also be considered. As has been pointed out by Forfás, there is a related risk that this type of policy approach could unfairly benefit serial entrepreneurs or existing businesses that may seek to benefit from the scheme unfairly by establishing new companies, resulting in no increase in employment or enterprise development overall. Furthermore, the effect of narrowing the rates base is to increase the rates costs for other ratepayers or to reduce the level of services that local authorities provide to businesses generally. It should be noted that various business support schemes operated by individual local authorities outside the ratings system have already been successful in targeting support in a managed way at specific categories of business.

The Bill appears to be providing the Valuation Tribunal with a swathe of new responsibilities without making sufficient legal provision for such new functions. The Valuation Tribunal is an independent body set up to deal with appeals to it against decisions of the Commissioner of Valuation on the rateable valuation of commercial properties. The Bill does not adequately deal with the matter of providing the tribunal with such new authority or provide any specific detail on how or on what basis an appeal can be made.

The Government has serious concerns about the Bill's proposed interference with the court process of debt recovery. Sections 18 to 23 appear to intend to repeal existing local authority recovery powers and replace them with an explicit power to recover debt in the District Court. It also restricts the matters that the court can consider when determining a case and on what issues it can make judgment. The matter of court authority and the civil process for the recovery of debt is a complex area and detailed consultation with the relevant statutory authorities would be required before any such change to the process could be considered. Restricting the power of the court in this manner could be seen as an attempt to interfere with its operation and should be approached with great caution, given the tripartite separation of powers.

The Bill proposes that an amendment be made to the Valuation Act 2001 to extend the exemption from rates provided to occupiers of premises that are considered to be community halls, sports clubs or other local amenities. The effect of the amendment would be to provide that only the element or portion of the building that was licensed for the sale of alcohol would be rateable. Following a Government decision on the matter, the Minister for Public Expenditure and Reform has introduced an amendment to the Valuation Act 2001 in the Valuation (Amendment) (No. 2) Bill 2012, which will include an exemption for buildings or parts of buildings that are used for community sport but are not used in the sale or consumption of alcohol or in the generation of income apart from club membership fees.

The Government is committed to keeping the overall approach to commercial rates under review, having regard to the objective of minimising business costs, enhancing competitiveness and other Government actions to support small to medium-sized enterprises, SMEs, as well as the retail sector specifically. This commitment is reflected in the various actions for which the Minister for the Environment, Community and Local Government is responsible under the Action Plan for Jobs.

Local authorities have successfully reduced or maintained annual rates on valuation in recent years, directly reducing costs for businesses. While the analysis of the impact of rates on business costs is limited, what analysis is available concludes that commercial rates represent a small portion of overall business overheads compared with energy, rents, payroll and other inputs. The figures vary from sector to sector, but research from Forfás, IBEC and local authorities indicates that commercial rates, on average, account for less than 5% of business costs. Similarly, local authority data from 2012 indicate that a third of businesses pay less than €1,000 per year, with 80% of ratepayers paying less than €5,000 per annum.

It is accepted that the current rates burden, while not excessive overall, may require redistribution in some cases and relies on outdated values. The revaluation process being undertaken by the Valuation Office is rebalancing the rates liability to ensure that the rates burden is more equitable and in line with relative changes in valuations across different classes of property. The Government holds the view that the focus should be on expediting the revaluation programme and ensuring that all properties that should be paying commercial rates are being appropriately valued and, therefore, charged rates by local authorities. Where up-to-date values are not available, distortions are occurring that place some commercial enterprises at a competitive advantage compared with similar enterprises. These gaps in valuations have a potential impact on commercial rates costs for other ratepayers within a local authority area.

Yesterday, my colleague, the Minister of State, Deputy Harris, was in the Seanad dealing with the Valuation (Amendment) (No. 2) Bill on behalf of the Minister for Public Expenditure and Reform. That Bill contains a series of measures to expedite the national revaluation programme. I trust that Deputies will be supportive of it when the time comes for it to be debated in this Chamber.

See this speech in context