Thomas Pringle (Donegal South West, Independent)
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To ask the Minister for Environment, Community and Local Government if, in the interests of the economic difficulties that small retail businesses in town centres are experiencing, he will consider bringing forward legislation that will allow for local authorities to implement a differential rates system that would see retailers being billed according to their turnover and their ability to pay; and if he will make a statement on the matter. [5547/13]

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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To ask the Minister for Environment, Community and Local Government if, in the interests of the economic difficulties that small retail in town centres are experiencing, he will consider bringing forward legislation that will allow for local authorities to implement a differential rates system that would see retailers being billed according to their turnover and their ability to pay; and if he will make a statement on the matter. [5480/13]

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I propose to take Questions Nos. 134 and 165 together.

Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes in accordance with the details entered in the valuation lists prepared by the independent commissioner of valuation under the Valuation Act 2001.

The Commissioner for Valuation has sole responsibility for all valuation matters, including the most appropriate method of valuation. The levying and collection of rates are matters for each individual local authority.

It is important to acknowledge that commercial rates, as a local tax, and the rating system generally are deeply embedded in the local government system. A large body of case law is well established and local authorities and rate payers are, in the main, very familiar with and generally accepting of the operation and practice of the rating system. Rates are also a stable source of financing for local government which is not affected unduly by short-term changes in economic circumstances.

A property-based tax such as rates has a distinct advantage over any tax based on profits or incomes as it is generally found to be easy to collect and difficult to evade. A system having regard to economic factors on an ongoing basis would create uncertainty by providing for continuous change to the valuation base. Such a system would not provide a stable basis for funding local government and would require significant additional resources to operate.

I am conscious that local authorities have exercised restraint in setting their annual rates on valuation, ARV, in recent years and the average change of ARV across the 88 local authorities has shown a decrease - admittedly small - in each of the last three years. I have asked local authorities to continue to exercise restraint or, where possible, to reduce commercial rates and local charges for 2013.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Basically the Minister is saying that there will be no change. The Government is failing to acknowledge and take action on what is an enormous crisis facing small and medium enterprises, which the Government itself constantly says will be the driving force and the motor behind our economic recovery. There are 4,000 family-owned businesses in this country employing around 90,000 which are on the line of survival now. Those businesses need a break. Commercial rates are a very serious burden on them. Different countries have different rates models. In Britain businesses are given rates holidays, while in Scotland a differential rates scheme has been introduced. Spain and Italy have models which are bands-based and the rates are related to turnover and profitability and to the notion of giving support to small businesses in town centres and so forth. I urge the Government to examine these models or to consider some model which distinguishes between small businesses and, for example, high street banks. Is it not ridiculous that Bank of Ireland, Ulster Bank or Tesco pays the same rate per square metre as a local butcher or florist? That is ridiculous and something should be done about it in order to give a break to the small businesses that the Minister says he supports.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I welcome the fact that Deputy Boyd Barrett is now seeking to champion the cause of small businesses.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I always have done.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I welcome him to the revolution that he is acknowledging has taken place with regard to small businesses.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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James Connolly was always on the side of workers and small businesses. It is the big businesses that are the problem.

Jan O'Sullivan (Limerick City, Labour)
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Connolly is ours, not Deputy Boyd Barrett's.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I am very surprised that he is doing so because he and his friends protested against my visit to a very important facility in his own constituency last week, valued at €100 million. They do not want people to pay anything, which would put more pressure on commercial small businesses struggling for survival as well as on Dún Laoghaire-Rathdown County Council to provide services for local people.

However, I accept that there is a need to look at the legislation. The Valuation (Amendment) (No.2) Bill is going through the Oireachtas at the moment and will provide the Deputy with an opportunity to make those points and to work with the Minister for Public Expenditure and Reform, who is bringing that legislation through the Dáil. That is the basis by which commercial rates are levied by local authorities. The question of a differential rate for small businesses as opposed to the larger entities that can better afford some of the commercial rate charges is something which I will keep under review.

Michael Kitt (Galway East, Fianna Fail)
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A lot of Deputies are offering so I will call Deputy Boyd Barrett first, followed by Deputy Halligan.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I wish to reduce the burden and not increase it, as advocated by Deputy Boyd Barrett.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We want to reduce the burden on small businesses and on low and middle income workers who, by the way, depend on each other. Who does the Minister think spends money in the small and medium-sized businesses on the high street?

It is the corporations and the very wealthy, who can hoard their money offshore and avoid their taxes while making enormous profits, who should be made pay a bigger share in order to give relief to the ordinary consumers on the high street and the small and medium enterprises which are being crushed by the recession and by the rates and parking charges which they cannot sustain and which are crippling many small towns.

I welcome the fact that the Minister is willing to look at this matter. A motion calling for differential rates, proposed by People Before Profit, was passed by Dún Laoghaire-Rathdown County Council with the support of the Minister's party colleagues. The Minister should look at international models we could follow to give a break to small and medium enterprises.

John Halligan (Waterford, Independent)
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Over a period of two years, 1,560 small businesses went to the wall. Many of them say their biggest problems were rent and rates. After that came car parks and overhead costs. I have spoken to small business owners in my own constituency. Even on the outskirts of the city they are paying the same rent per metre as the big stores in the centre of the city.

I spoke to the owner of a small business where only two people are employed. The business is paying €8,000 in rent per year. That may not sound like a large amount but it is a great deal of money to a small business with only two people trying to make a living out of it.

The introduction of a differential rent scheme is a reasonable request for small businesses to make, considering what huge shopping centres can pay. The big centres may also be experiencing difficulty but not to the same extent as small businesses, so many of which have been foreclosed.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I agree with the sentiments expressed by both Deputies with regard to helping small businesses through these difficult times. Small businesses in a provincial town contribute a substantially higher proportion of their profit to their local authority than in a major town or city. There is a case to be made and I am prepared to look at any opportunities, with the help of the Minister for Finance, to deal with these matters. The Valuation (Amendment) Bill should give us the legislative basis to do that. We may make representations to the Minister for Public Expenditure and Reform to see what can be done to find the legislative basis to do so.

Local authorities have shown flexibility, in so far as they can, to keep businesses open. I have asked them to be as flexible as they possibly can. Where a premises is not being used to the maximum I have asked them to show flexibility in reducing the rates burden, to tide us over the current difficult financial situation when the decline in trade and throughput means the disposable incomes of businesses are not what they were.

The development levy scheme was recently announced by the Minister of State, Deputy Jan O'Sullivan. The development contribution scheme is now under review by the local authorities. Where improvements need to be carried out in core strategy areas and town centres, local authority members now have a chance of reducing development contributions. There is not the same level of activity in those town centres at present and some respite or reduction in the development levy scheme could generate much needed economic activity in the form of improvements to premises and employment opportunities in those areas.

Barry Cowen (Laois-Offaly, Fianna Fail)
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The Government has admitted defeat with regard to upward only rent reviews. We will park that failure.

With regard to commercial rates, however, does the Minister know that commercial rents have come down in many provincial town by as much as 70% in the last four years? Commercial rates have come down by, at most, 6%. Does the Minister agree that the correlation between the two should be closer, in line with commercial reality?

The Minister referred to the Valuation (Amendment) Bill. Is it the Government's intention to overhaul the archaic commercial rates system as part of the programme for putting people first, devolving power to local authorities and changing the way they do business?

Is less more? It can be in this instance. The Minister must take some risks in this area to address the terrible conditions and atmosphere in the small business community. The correlation should be a lot closer than 70% and 6%, and if the Minister agrees, it is incumbent on the Government to honour its commitment to overhaul the commercial rates system. It is archaic, does not work and pays no dividends to those we represent.

Mick Wallace (Wexford, Independent)
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I welcome Deputy Barry Cowen's remarks that rates have fallen by 6% somewhere in the country. My experience is very different. Dublin city is undergoing revaluation at present and we were told that material change of circumstances would be taken into consideration. Now, however, the Valuation Office is going on physical appearance only when, surely, turnover should be a factor. There is no consistency in the way revaluation is done on properties and we do not know what the criteria are. Currently rates are calculated by multiplying the rateable valuation, which is based on the 2011 rent, by the multiplier that is set annually by Dublin City Council. We were not even asked what our rent was in 2011.

For the record, I have a café in Dublin 1 and following revaluation, the rates will be going up 37%. I have a wine bar and restaurant in Dublin 1 and the council wants to increase the rates by 25%. I have a wine bar and restaurant in Inchicore and there will be an increase of 42%, and on the North Circular Road, which is not exactly Grafton Street, the council is increasing the rates by 79%. There is no logic to what the council is doing, and there are no transparent criteria or accountability. How can the council work these figures out when it did not contact us beforehand?

Catherine Murphy (Kildare North, Independent)
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In his initial reply, the Minister mentioned the security of rates as a source of funding for local authorities. If shops and businesses close down because the increase in rates has made them unviable, dereliction and job losses also become issues. There must be a whole of Government response to this. When the Valuation (Amendment)(No.2) Bill reaches Committee Stage, what input will the Minister have on nuance? Will the Minister insist only on a secure funding source or will he take a broader look at a more nuanced approach to the changes that might be made?

Brian Stanley (Laois-Offaly, Sinn Fein)
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There must be an income element to the rates - that is Sinn Féin policy. One of the problems small businesses are having is that if a premises is vacant for a period and a business takes it over, the rates carry over. The Minister often talks about the North and I am delighted he is starting to make comparisons between the two parts of Ireland. In the North, the rates are related to the business itself. Unpaid rates from a previous business do not carry over to a new start-up, although they do in this State. That causes a lot of problems. Also, it does not make sense to have the euro shop paying the same per square foot as Allied Irish Banks.

Clare Daly (Dublin North, Socialist Party)
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Development levies have nothing to do with this at all. The Minister mentioned the Valuation (Amendment)(No. 2) Bill on a number of occasions but there are problems with it. There has been an inordinate delay in bringing it before us. Six months is the difference between a small business going under and surviving.

My experience is that local authorities are not flexible. They tell people they are mandated to implement the regulations as they stand and they have no flexibility at all. In interventions I have made on behalf of small businesses in my area, the response is that the local authority knows things are difficult and that a business might not have the money but if it owes rent or money to the bank or suppliers, it should give the local authority that money and leave the others short.

That is what we are dealing with. The matter will not be resolved unless there is an input from the Government.

Michael Kitt (Galway East, Fianna Fail)
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A final reply from the Minister.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I agree with the sentiments expressed by all Deputies about the frustration of small business with commercial rates and their application arising from the existing Valuation Act. The Valuation (Amendment) (No. 2) Bill 2012 is working its way through the Upper House and I hope it will be in the Dáil in this session.

There are many anomalies. I am sure that all of us, from our direct experience with constituents, come across them on a regular basis. I would be anxious to work, perhaps with the relevant Oireachtas committee, to see what changes could be made through making a submission to the Valuation (Amendment) (No. 2) Bill. It is too important for small businesses in the context of survival for many of them.

The differentiation of the rate is a suggestion that should be examined. There are many cases, of which Deputy Wallace and, I am sure, everybody in this House could give examples, where they are trying to rebalance the rate base rather than giving a fairer system. Where there is an increase in the rates levied arising from a valuation, such as the ones mentioned, that is done for the purpose of giving a break somewhere else. That is not always apparent and it depends on the criteria and the factors that are taken into account, which I will not go into today.

Mick Wallace (Wexford, Independent)
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Who was given the break?

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I am sure other sectors of the economy are getting a break.

Mick Wallace (Wexford, Independent)
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Offices, maybe, but retail is screaming and is on the floor, so to speak.

Michael Kitt (Galway East, Fianna Fail)
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We are out of time.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The House will be aware that the hotel sector got a significant break of a reduction in its rates base in the past year and it acknowledged that. Maybe Deputy Wallace is not aware of that. The hotel sector is a significant employer as well.

The point Deputy Wallace makes, with which I agree, is that there is a significant problem here. The Valuation Office is too slow to carry out revaluations, the appeals system is not satisfactory and the basis on which commercial rates are levied needs to be looked at. There are a number of issues.

Deputy Halligan and Members from Limerick and Tipperary will have an interest in the following. Limerick is a good example of where efficiencies have been generated already arising from the merger. There is a 5% reduction in its commercial rate in 2013. I hope all local authorities, such as Waterford and Tipperary, where there are mergers, will follow suit.

John Halligan (Waterford, Independent)
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If the Minister gave us a little extra.