Thomas Pringle (Donegal, Independent) | Oireachtas source

It is topical that we are discussing the Government’s Local Government (Rates) Bill 2018, which proposes to modernise and consolidate existing legislation governing commercial rates in Ireland, because in spring of last year I carried out an extensive survey measuring the health and optimism of the small business sector in County Donegal. More than 100 businesses responded, painting a stark picture of the continuing struggles small businesses have faced since this Government came to power. I felt it was time to measure the health of this sector and to listen to businesses and their concerns. I believe that measuring the health of the microbusiness sector measures the overall health of the rural economy. Local businesses are the backbone of rural economies, providing sustainable local employment if supported. My priority was to concentrate on small businesses which fall outside the remit of Enterprise Ireland as they are not primed for export. Coffee shops, hairdressers, butchers and many more types of businesses contacted me via the survey. Some respondents said it was the first time they were ever asked about their concerns.

The results suggest that while businesses are emerging from a disastrous decade of austerity, they are now facing new and existing challenges left largely ignored by the current Government. Only half of respondents said their business has improved since the recession, indicating that Donegal’s rural economy continues to struggle. Most striking was that more than 80% of respondents said they were concerned with depopulation trends and the retreat of rural services like post offices, Garda stations and even banking facilities in Donegal. Some 80% of businesses also cited a general unawareness of Government supports, with many reporting various challenges left unaddressed by the current Government.

Many businesses gave me an extensive response outlining their main challenges. Most of them mentioned commercial rates, pointing to high rates or an inability to work out a long-term sustainable agreement with the local council and persistent anomalies in the rates assigned to businesses across the county. That applies across all sectors and all types of businesses. They all had the same response. In fairness, it is difficult for the local authority as well. The rate is not set by the council. The council has to collect the amount that is set. It can and does agree on deals with ratepayers who are experiencing difficulties. The problem is that at the end of the year, the council must still levy the full amount from those businesses. This is very frustrating for business people. They do deals and get reductions of 50% or whatever it is. Then the council sends them letters twice a year demanding the full amount and threatening all sorts of penalties. A trader may have already concluded a deal a couple of weeks previously, but that does not matter. Legally, the council must go down that road. That is very difficult.

There are all sorts of anomalies in the rates system. There is a hotel in Glencolumbkille which has been closed for many years. That hotel paid the same rates as two hotels in Ballyliffin, where the Dubai Duty Free Irish Open was held last year. There is a world-class golf course in that town, and two hotels pay the equivalent of one hotel's rates in Glencolumbkille. That is nonsensical. I also know of one pub in a rural village in south Donegal which pays twice the rates of a similar pub in a village in Inishowen. This insight is derived from just a half an hour spent looking at valuation reports at Valuation Office Ireland and going through businesses I know. If I can pick out these anomalies, they can be found right across the county. There is no consistency in how rates are levied or in the amount demanded. This is visible when comparing towns and villages of similar sizes. That is a real problem right across the board. Unfortunately, this Bill does not do anything to address that, but it is something that needs to be addressed. Local authorities also need the freedom to set and collect the rates themselves, outside the control of the national office. There may be historical reasons for which the national office was founded and rates have been managed in this way, but we need to move on.

My understanding is that the current Bill seeks to reform some aspects of the management of commercial rates. While I welcome some of these aspects, the Bill is vague on how it sets out to achieve worthwhile reforms. For example, the explanatory memorandum for the Bill states that it will "form a basis for greater enforcement powers by local authorities in their collection of rates", yet there is no mention of any specific enforcement provisions other than those relating to the appointment of authorised officers under section 15.

Section 14 provides that local authorities may introduce a scheme to provide a waiver for all or a portion of the rates due to support the following:

(a) the implementation of the National Spatial Strategy within the meaning of the Act of 2000;

(b) the implementation of a development plan within the meaning of the Act of 2000;

(c) the implementation of a local area plan within the meaning of the Act of 2000;

(d) the implementation of a local economic and community plan within the meaning of the Act of 2001.

Again, very little is explained on this point, but I hope to see local initiatives being able to access this waiver scheme. One strong point that emerged from my business survey was the reliance of businesses on local trade and not just tourism, although that is important. They are mainly sustained by local traffic, local residents and people from the local area. It is evident from my business survey that more focus needs to be placed on driving up local trade to help small businesses survive new challenges. Any time I mention this issue to the Minister, the Government is quick to point out supports for businesses in tourism, even though my survey showed that nearly 80% of businesses rely on local trade. This is where we need to be focusing. I hope the reform of the rates system will help that in some way. If this could be made part of a local economic and community plan, we could see rates being reduced for those businesses that continue to struggle with the trend of reduced local trade caused by rural depopulation.

Section 11 provides for the levying of interest on any overdue rates. This section provides that any rates levied by a rating authority will carry interest from the first day of January in the following year in the event of failure to pay. This is a new provision which was not provided for in previous commercial rates legislation. There needs to be a mechanism whereby local authorities can legally restructure payments of rates, just like the mechanism we are calling for to operate between banks and lenders, particularly homeowners. Essentially I am describing a restructuring. Many businesses have an unofficial arrangement with local councils to delay or restructure rate payments, but businesses are then charged halfway through the year because this is what the council is legally obliged to do.

It is clear that Ireland has a rates problem. According to a public policy study carried out in 2016, only four local authorities had collection rates at or above 90% in the year 2016. Two collected less than 70%,my own county of Donegal and Louth. Furthermore, the study stated that outstanding year-end arrears for 2016 were in excess of €297 million, twice the arrears found in 2008, which amounted to €137.2 million. Overall the end-of-year arrears increased threefold between 2008 and 2012. Rates arrears are a legacy issue stemming from the recession, when rates were not collected due to very challenging times. This has been carried over, causing a backlog for individual businesses. Clearly we have a problem which this consolidated legislation will not resolve. It is safe to say that Ireland has a real problem with the issue of rates, both from the point of view of businesses and county councils themselves. This is something we very much need to address. We need to consider offering local authorities greater flexibility in collecting the amount of rates a business can afford to pay at any time while also expanding local authority powers to abate rates where appropriate. Of course this will mean funding must come from other sources, but I can think of a few, such as multinational companies, that are exempt from rates altogether. If we started there, local authorities might have leeway in helping business through challenging times.

We need to do something before Valuation Office Ireland conducts a revision of existing valuations in the north west, including Donegal, which is due to take place this year. This is likely to see rates increasing as they have been in counties which have been reviewed. Ultimately, if the Government paid more attention to small businesses, it would know they have a lot of great ideas and have a better understanding of local economies than Fine Gael has been showing to date. It is time Donegal and rural Ireland got no less than a full cross-departmental commitment to addressing the continuing challenges facing small businesses in rural economies and to diversifying funding to meet the needs of these businesses and local communities.

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