John McGuinness (Carlow-Kilkenny, Fianna Fail) | Oireachtas source

At the outset, I pay tribute to the Valuation Office's Accounting Officer who for a period, while matters were being managed better, actually did the job without any cost to the State. He was extremely helpful in terms of understanding the workings of that office when he came before the Committee of Public Accounts. He has given great service to the State and extended that service by doing the work, as he did, without pay.

I welcome the introduction of the Bill. One has to go to the very end of it, however, to understand what it is setting out to do, which is to strengthen the numbers in the Valuation Office and provide appropriate IT structures for the work to be undertaken. In addition, there are various sections which essentially refer to the office itself and what the commissioner shall or shall not be able to do.

My main concern about the legislation is that it does not go far enough. It does not deal with the issues that are being faced today by businesses throughout the country. The cost of creating a job through the IDA runs to roughly €13,000, but at one time SMEs created close to 1 million jobs. They tailored all their costs, cut back where necessary and ensured that they were competitive. The one single cost they could not cut back on, however, concerned rates. Regardless of their turnover or the challenges they faced, particularly from 2007 onwards right up to today, they were unable to cut the cost of commercial rates.

It indicates that those involved in creating jobs in the SME sector - small businesses run by families or individuals, that are central to our economic recovery - were, by and large, ignored. They were not assisted either by central government or local government. That is a reflection of the State's attitude to collecting taxes, because this is a tax that has no bearing on turnover or one's ability to pay. It is simply a direct extraction of money from businesses into local authority coffers. I would like to see that situation being changed.

The activities of the Valuation Office in terms of the revaluation process have clearly shown that it would take decades to complete what is necessary throughout the country. The starting point is that regardless of what happens in a county, whether the rate on particular businesses goes up or down, the take from the process must be the same. The concern for bureaucracy in local government means that while the take in 2013 was €1.47 billion, it cannot be reduced in any significant way. Whatever is done, therefore, nothing will be done about that amount. All that is happening is that pieces are being shifted around the board. Those pieces represent businesses run by families or individuals who are under pressure to continue paying a rate that is above and beyond the demands that should be made on them.

Most of the newly constructed premises came about from 2007 onwards when massive construction took place. Rates applied to those buildings reflected the values of the properties at that time, as well as commercial activity and the ability of those within the business sector to pay. They are still paying the same level of rates. Unless local authorities understand what is going on in the SME sector, they will continue to pursue businesses for 100% of that rate.

Some local authorities have engaged with the business sector. They have reduced the rate on buildings by an amount equal to the space that is not being used. However, there is an argument for them to do even more because businesses are still unable to pay. It is not only about the space being used, therefore, but also about profits made and an ability to pay rates.

The subsequent occupier clause has been another area of contention over the years. Properties remained vacant because outstanding rates could not be sorted out, so the landlord owed the rates or was left with the rates bill after a tenant moved out. Those rates stayed in demand as far as the council was concerned and because of that legal issue, properties were neglected and not let. This shows a clear misunderstanding of the SME sector.

That needs to be said loud and clear because if we are to get any change, it must be based on a business's performance and ability to pay. Why should a local authority have within its power the ability to take €1.47 billion in 2013, yet have absolutely no intention of examining whether a company, be it run by a family or an individual, can pay those rates? It should be remembered that they are paying taxes as well as creating employment. This sector has been considered a soft touch for too long, so the rates system needs to be taken asunder and explored. It is essential to have a greater recognition of one's ability to pay.

Other aspects of rates are also a cause for concern. If one was lucky, in the course of better times, to build an extension to one's premises or refurbish it, as well as taking the risk to create employment or introduce new services, the first thing that happened after getting planning permission, having paid fees and all the other charges imposed by a local authority, was a rate assessment. A person who just trundled on in their business, doing little but having a turnover, paid a lower level of rates than an entrepreneur creating jobs. The latter was penalised by the taxation system through the commercial rates reassessment.

The biggest single issue in the country today, as outlined yesterday by my colleague, Deputy Troy, is the cost of child care and keeping crèches open to enable people to return to work. Sometimes they go back to work to service a mortgage. In most if not all cases, however, it is a question of servicing debt caused by mortgages or other obligations. The State should understand that servicing personal debt is causing difficulties within families who must pay large sums of money for child care. That issue could be dealt with by simply exempting all these educational centres from the payment of rates. Such action by the State would be recognised by that sector concerning the costs involved, which are borne by parents who are making a genuine effort.

The same could be said of sporting organisations. What does the Minister of State intend to do with a sporting centre, a club or licensed organisation that has become a community centre?

We have devastated rural areas by supporting policies which lead to the closure of local pubs, grocery stores and post offices. There is nothing left in some villages other than local GAA clubs, in the main, or other sports clubs. The clubs in question have availed of grants and made every effort to galvanise communities, particularly children, who represent the next generation, by providing some social activity that will assist in rebuilding structures within those communities. The general properties owned by such clubs should be exempt from rates. If there is a bar on the premises, perhaps there should be a special consideration in respect of it.

Those who will argue against everything I have said will do so on the basis that doing as I suggest would result in the State's tax take being reduced. We are asking that, in the context of commercial rates, the tax take should be reduced. Let us not be afraid to confront that particular matter. The tax take should be reduced on the basis that local business are being pushed to the wall as a result of the amount of tax they are obliged to pay. These businesses create and sustain jobs and they are often run by families whose members work way beyond what is required of them to keep local community enterprises in operation. They lie at the very heart of communities and they keep going to provide people with both hope and access to services. The position in Ireland has changed because many villages and towns have been devastated. I am of the view that commercial rates are part of the problem in this regard. They are not the only factor but they are certainly a great cause for concern, especially for local businesses.

Another issue to which I wish to refer is the local government audit. If savings were made in how local government is administered and if responsibility for deciding on commercial rates was really left with local authorities, then it would be possible for the authorities to stimulate local economies by being able to take the political decision to reduce the level of those rates. That would be a good development because it would return the power of valuation, regardless of whether this was on the basis of self-valuation, and the ability to strike rates to bodies of individuals elected by the people. Those bodies would then be in a position to deal directly with the demands of local economies. For many years, this House has discussed the reform that is necessary in local government. Let us amend the legislation before us and give local authorities the ability to make all of the changes that are necessary, including those relating to commercial rates. Most of what is proposed in respect of this matter is compiled by bureaucrats and put before local authorities as a done deal. Those authorities cannot then walk away from what is proposed. They must either accept or reject it.

How many groups were consulted in respect of the legislation before the House? How many business people, large or small, were asked to outline their views and indicate how they would change the legislation, especially to make it better, expand it or ensure that it might deal in more general terms with the question of commercial rates? It must be remembered that in addition to those rates, water charges are also being imposed by local authorities. The rate in respect of such charges is €3 per cubic metre of water in and water out. This means that everything is being pushed onto local businesses. Those who intend to support the legislation should ask about the number of inspections to which businesses are subjected at present. They are certainly liable to inspection by the Health and Safety Authority and the HSE. Depending on the type of activity in which they are involved, businesses can also be subject to many other inspections, including those by the Revenue and, dare I say it, the National Employment Rights Authority. That is what businesses are obliged to deal with and they object to it on the basis that they are not being consulted. They also object because it is they who pay the greatest amount of tax and who create jobs. Occasionally, some of those involved in SMEs do this by investing their own personal funds because all of the costs relating to the business are not covered by its income.

The difficulty is that there are those in this House who do not understand what I have just outlined. Regardless of how we appeal to the Government of the day, and I did so when my party was in power, there remains very little understanding of what is involved in creating and maintaining a small business. The Bill before us illustrates that this lack of understanding continues to obtain. Any reform introduced in this House is based on how much the State receives at present and the need to ensure that its take will not be reduced by the proposed reform. The issue is that the State is taking too much from businesses while simultaneously informing their owners that we are relying on them to rebuild the economy and create employment. There is a contradiction in the Bill which must be confronted. Will the Minister of State and the Cabinet confront that contradiction and discuss matters with those in the SME sector in the interests of coming up with something that is fairer, more equitable and based on people's ability to pay?

The amounts people are expected to pay in respect of leases and rates are phenomenal. Before those in government were elected, they gave a commitment to end upward-only rent reviews. No one in this House said anything when Bewley's, which was the subject of an upward-only rent arrangement, was obliged to close with the loss of more than 100 jobs. How long did it take to create that enterprise and how many millions did it take to maintain it? Bewley's is just one example of a business that was allowed to close. Some of the properties leased by Bewley's and companies like it are often owned by banks or pension funds and these are untouchable. I appeal to the Minister of State to reach out and touch therm and to break the stranglehold of the upward-only rent review clause. Every other landlord in the country has been obliged to reduce rents to retain tenants. Some of them have been successful in this regard. Current practice in respect of tenants such as Bewley's and the many other companies to which reference has been made is to keep them in operation at the premises they lease and screw them for the highest amount of rent possible. Certain landlords are able to do this on the basis of leasing arrangements which are, quite frankly, immoral. The Government stated that it would take action on this matter and it is past time for it to intervene and resolve it, once and for all, before more of our high street enterprises are forced out of business. That is the eventuality we face.

Many businesses in urban areas throughout the country have been obliged to close as a result of the challenges with which they were presented. If one drives down the street in any village, town or city, one will find nothing but pubs, post offices and small shops that have been boarded up. We need to do something to reignite rural areas. This would partly involve an understanding on the part of local and central government that something needs to be done about rates, upward-only rent reviews and any other issue that confronts SMEs to encourage them to employ more and stay in business.

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