Mick Wallace (Wexford, Independent) | Oireachtas source

I refer to the complex and technical measures used by the Valuation Office in producing the rateable valuation figures. The local authorities decide what funding they need for the year and then they work backwards and introduce a rate which will produce the money. This system is not ideal and it puts the local authority in a very difficult position. It is tough trying to run a business in Dublin which depends on the domestic economy but it is even more difficult in the countryside. It is a big problem if the local authority is compelled to be tough on small businesses to get the money to run its operations. It is not an ideal method for collecting that money.

In 2014 there was a vacancy rate in premises in Wexford of 13% as a result of the downturn. The percentage of rates collected was just over 69%. It is the case that money cannot be got because businesses are finding it too challenging to pay rates.

The growth of Tesco, Aldi and Lidl has put very great pressure on small shops. It is very difficult for a small shop in competition with the big supermarkets to be able to pay rates. When a council introduces its rate of valuation, it is not considering how a particular business is doing. Deputy Fleming suggested that it might be better to tie the rateable valuation to rent and there is some logic to that argument. The Minister of State may be able to highlight pitfalls in that suggestion of which I am not aware. I see so many places in the countryside in my county of Wexford, for example, where life is very difficult for businesses.

I have been speaking to the people who collect the rates in Wexford and they find it almost impossible to collect the rates from pubs. When the pubs were doing well a few years ago, many of them built big lounges because they knew they could fill them. Nowadays, they may only be using one third or a half of the premises but they are being rated on the entire premises. There is not a rateable valuation for half of a premises whereby the rate is only charged on the space being utilised. I suggest the Government should consider such a rate because it is a rational idea. If the owner makes the case that he is only using half of the premises, I do not think it is fair to ask him to pay for areas he is not using. Likewise, the same argument could be made for vacant units. In Wexford, for example, a vacant unit attracts 100% relief from rates but the rate is 50% in Dublin.

A couple of years ago I had a warehouse in which we could have played football. We bought it to knock down and build apartments, but while it was still standing we used it as a store. The rates on it were draconian as we paid 50% of what they would have been if it was being used for commercial purposes. It was a bit harsh.

A problem is coming down the tracks in places such as Wexford where urban councils are being done away with. The rate on valuation which has been fixed for 2015 by Wexford County Council is €71.52. New Ross is not a thriving town and life there is difficult for small and medium-sized businesses. The rate on valuation there is €55.47. Dragging these businesses up to a rate on valuation of €71.52, which will be done over a few years, will be very difficult for them and this should be considered. If business is weak in one town but very good in another town 20 km away, the same commercial rates should not be charged in both. Ability to pay is not factored into rates, but it is at the core of the issue. How to do it best is challenging, but I believe the idea of tying it to rent would come close.

We have had some problems with rates on properties and I was very curious as to how things were done in Dublin city. I went to the Valuation Office, where Patrick Kyne and Declan Lavelle work, and I was really impressed at how it does things. The staff there do their best with a very archaic system. They were very impressive. I could see they are trying to be as fair as they can. I spent approximately two hours there and we looked at all of the various streets in Dublin, which I know pretty well, and the different rates on different streets. One guideline the office has is to grade units from A to D, depending on how far they are from the footpath. Those graded A are most expensive because they have the most shop front.

We have a wine bar on Russell Street and it is almost all A graded, including the kitchen, which makes the rates very high. It does not take on board the fact we do not have tables in all of the area, whereas most restaurants place their tables as close as they can to the street front. People like to see their food being cooked, and it is good for a restaurant to be able to do this. We put the kitchen very close to the street with the tables around it. We are being punished because the kitchen is too close to the street. We are paying far too much in rates for kitchen space and storage.

It is very challenging for the Valuation Office to come up with a fair system that works fluidly across the board. We have just been revalued in Dublin and there has been debate about it. The rents on two of our units have reduced by approximately 30% but the rates on them have increased by approximately 35%. This does not make commercial sense. The rent reflects the value of the unit at the time and its earning capacity. If a unit can make a lot of money, the guy who owns the building will charge a bit more for it and it will be reflected in the rent. A decrease in rent also reflects the level of business going on at the particular time. The fact the rates are not connected to this is problematic. I am not so sure how this would be done without tying them directly to rent but it needs to be examined.

The Minister of State spoke about appeals and stated a more efficient appeals mechanism will be put in place, which is to be welcomed. Revaluations will take place every five to ten years. I would like to think they will be closer to every five years than every ten years because economies go up and down in cycles. I know valuations cost money but they should be done regularly. The rates on some of our units have been set but already I would like to appeal them. I do not know whether the Bill will let us back in the door to speak to the Valuation Office because of how recently the rates have been set. We feel the rates are fair on some of the units and we can see the logic behind the final figures, but we do not see the same logic behind the figures for other units. Perhaps the Bill will allow us to challenge some of them as it would make sense.

Earlier I mentioned the many vacant units in the country. When someone considers the prospect of renting a unit, the rates can be very challenging. I wonder whether consideration might be given to the idea of a rate-free period for vacant units, particularly in provincial towns and villages, to encourage people to move into them. There are so many empty units in Ireland at present that many of them will not be filled for a long time and some of them may not be filled again. It would be good if the Government were to introduce a measure to encourage people to take on these units and a rate-free period would certainly help.

This year, Wexford County Council intends to collect approximately €37 million. I know many people in small businesses in Wexford who do not think much fairness is applied to what they must pay. As long as the local authority needs the money to survive, it cannot go any easier on them. Last year, Wexford County Council wrote off €5 million which it knew it would never get. I am afraid if there is not more flexibility with some customers who are in difficult times they could be added to the list of vacant units. Most people would agree there has been a bit of a lift in the economy in the Dublin area.

I admit that in 2014 we saw larger numbers come through our doors, mostly through tourism, as there was an increase in that sector, particularly in the Dublin area, and that was good. Businesses in places such as Wexford are not getting the same boost and that is a major problem. I have not noticed in my lifetime as much of a divide as now exists between the countryside and Dublin. It is almost at a stage where Ireland is Dublin and the rest of the country is a long way behind. I point to the recovery in house prices in the Dublin area compared to Wexford. There has been no movement house prices in Wexford in recent years while there have been dramatic price increases of up to 25% in Dublin. That is a reflection of what is happening in the area. There is far more optimism around Dublin. We depend very much on foreign direct investment for much of the extra work that is coming our way. The days of telling the large foreign corporations that come into the country where to set up their businesses are probably gone. Most of them want to be within the Dublin orbit because it is far more attractive to them.

I firmly believe that some day a Government will put much more energy into developing indigenous industry. I am convinced that more can be done in that area. We do not do enough in it. The provinces will continue to struggle until we put far greater energy and investment into creating indigenous industry and helping people with start-ups. It goes back to the old chestnut of where do we get the money and there not being enough of it. We have had that discussion time and again with regard to different areas with different Departments. The fact that we can borrow money at 1.7%, or less sometimes, on the markets in order to do certain things but we are not allowed to do other things and are forced into the hands of the private sector, through public-private partnerships and other different arrangements, where money costs in the range of 15% is very unfortunate. If Europe is to function in the proper spirit of what it was designed to do, that is something that must be addressed. The State should be allowed to borrow money at 1.7% to invest in indigenous industry, infrastructure and in any area that it is needed without driving it into the hands of the private sector which makes a great deal of money out it. That was part of the Lisbon and Nice treaties and it created great opportunities for the private sector to make money through the State. That is holding back many things because we all know that if we had the opportunity to spend more money in these areas, there would be huge benefit all round and there would be a big flipside for everybody. It would have a domino effect and it would make a massive difference.

To return to the issue of rates, my main point is that I am inclined to agree with Deputy Fleming, namely, that tying rates to the rental factor would probably give us a fairer system.

The only other issue I wish to comment on is that of outsourcing. I was very impressed by the people I met in the Valuation Office and it is unfortunate that they cannot expand their resources to a degree where outsourcing would be unnecessary. If a Department can function well, I do not see the logic of that office outsourcing work in this way. If the office is going to carry out valuations on a regular basis and this is going to continue every five to ten years, there will be a good deal of work in that area. It would make sense to increase the resources in the Valuation office rather than simply outsourcing the work.

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