Dáil debates

Thursday, 13 June 2013

Topical Issue Debate

Local Authority Charges Review

12:55 pm

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick, Fine Gael)
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I thank the Ceann Comhairle's office for selecting this topic and welcome the Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes, to the House. Earlier, there was an indication that the issue might be taken by a representative of the Department of Jobs, Enterprise and Innovation. Someone was trying to disown it, which I found surprising, as there has been a Valuation (Amendment) (No. 2) Bill on the Seanad Order Paper since last August. There has been little movement on it, which is very disappointing.

The Minister of State will be aware, having met local authority members during the week, of the sense of frustration among commercial ratepayers, particularly retailers nationally, about the system of valuation and collection of rates. It is really causing major difficulties. This is the last Victorian form of taxation we have left. During the week, there was a Private Members' Bill before the House seeking the repeal of the local property tax. I support the concept of a local property tax, which is a form of local government revenue generation which is voluntary from the point of view of the valuation of residential houses.

We could learn an awful lot and apply it to the valuation of commercial property. Currently, the only thing the Valuation Office takes into consideration is the building's location, size and letting value. It does not take into account whether it is high up or low down, the commercial reality as it pertains to an individual, or the difficulties a person had in keeping the door open. One of the first hello letters people get when they establish businesses is a demand for rates from the local authority. Also, bad debts are accumulated and carried forward, particularly in the case of commercial premises for sale in commercially attractive areas. One of the primary reasons they cannot be sold is the debt, due to commercial rates from the local authority, associated with premises hanging in the background. In this country we are trying to deal with debt from the point of view of the State and the individual but we avoid addressing debt from the point of view of commercial property and the business community.

Members routinely say the only way we will stimulate growth in the economy to a real and sustainable level is to increase confidence. The retail sector has had its confidence sapped and is in dire need of having the calculation procedures for the collection of commercial rates reformed. Some two and a half years into this Government's term, even though the issue is a cornerstone of the programme for Government in terms of funding local authorities and empowering local authority representatives to get on with their jobs, the legislation is still hanging around and is no closer to the Dáil than it was a year ago. For that reason, I am disappointed.

1:05 pm

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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I thank Deputy O'Donovan for raising this important matter. The Government published the Valuation (Amendment) (No. 2) Bill 2012 on 3 August 2012 as part of its legislative programme. The main purpose of the Bill is to accelerate the revaluation programme, which is required to take account of the differential movements in property values that have occurred over a prolonged period of time in order to maintain uniformity in the valuation base. Such uniformity is essential in order to achieve the policy objective of ratepayers paying commercial rates on an equitable basis. This, in turn, supports a more competitive business environment and an improved compliance environment. Such a comprehensive revaluation of property has not been undertaken since the middle of the 19th century.

The Bill proposes a number of specific measures in this regard. It provides a statutory basis to enable the Valuation Office to put pilot schemes in place for outsourcing some of the revaluation work and exploring the possibility of introducing an element of self-assessment by ratepayers to the valuation process. There are additional provisions in the Bill that seek to streamline the current valuation process. Each of these will help to speed up the revaluation process. The Bill proceeded through Second Stage in Seanad Éireann in October. Officials in the Department of Public Expenditure and Reform and from the Valuation Office have engaged with a wide range of stakeholders and other interested parties on the Bill and potential amendments that may be introduced on Committee Stage.

The programme of revaluing all commercial and industrial properties in the State for rateable valuation purposes is the responsibility of the Valuation Office, which is headed by the Commissioner of Valuation, who is independent in the exercise of his statutory functions, which are principally derived from the Valuation Act 2001. The national revaluation programme was provided for in the 2001 Act and the expectation was that the complete revaluation of all commercial property in the State would take ten years to complete. That has not happened and the assumption has proven to be overly optimistic.

To date, the revaluation programme has been completed in the South Dublin County Council area in 2007, in Fingal and Dún Laoghaire-Rathdown county councils in 2009 and 2010 respectively. The revaluation of Dublin City Council, the largest in the country, began in May 2011 and will be completed with the publication of a new valuation list in December 2013, which will become effective for rating purposes from January 2014. The Valuation Office is continuing to extend the revaluation programme across the country. The commissioner signed valuation orders for the three Waterford rating authority areas on 12 December 2011 and for Limerick County Council and Limerick City Council on 29 March 2012. The Waterford and Limerick revaluations will be completed in 2013 and 2014 respectively. At that stage, approximately 33% of all rateable properties in the country, representing over 50% of the national valuation base in monetary terms, will have been revalued. The Commissioner has also indicated his intention, subject to a statutory consultation process that is now under way, to sign valuation orders for Galway City Council, Carlow and Kilkenny rating authority areas during 2013.

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick, Fine Gael)
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I accept what the Minister of State said in terms of the painstaking nature of the acceleration of the programme. He referred to the equitable basis but the current system is inequitable and I do not see it changing any time soon without greater voluntary and individual input. This should be along the same lines as the local property tax regime, whereby a relationship of trust is built up between the local authority and the individual and that we trust them on the basis of the commercial reality as it pertains to the business, what they can pay and what they should pay. Two different businesses may exist side-by-side on a street. In any town, there is dereliction and vacant properties, which is in part due to the valuation process, the length of time it takes and the archaic Victorian system of compiling rates. We need to examine the length of time valuation is taking and the concept of whether the valuation system is fit for purpose. It was designed under the Griffith system in the middle of the 19th century and has not changed since.

The State has introduced a form of taxation this year, the local property tax, which is based entirely on trust. We need to examine that model with commercial people and businesses. If 30% of properties are valued after four years, it will take another four years before the remainder is valued. In the meantime, retail space all over the country is crippled. The Bill does not take reality into consideration. For many local authorities, the compliance rate in 2009 was 84% and dropped to 76% in 2011. It does not take into consideration people's inability to pay. This must be examined so that we can say we are delivering, like a local property tax, a form of funding for local authorities. I do not see that happening in the current Bill. When the Bill finds its way to the Dáil, I ask that the Government be open to taking suggestions from ISME, the Small Firms Association, individual retailers and Deputies who have been inundated with people telling them about commercial reality and commercial rates.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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I can confirm that the Government is open to looking at any system that will obtain the same amount of money. For the ratepayer, the net issue is the cost and for the local authority the net issue is how much money is obtained. We will examine any system that generates the same amount of income, if not more. I refer to the two amendments to the existing Bill tabled in the Seanad.

One provides for more self assessment as a pilot model. That goes towards what the Deputy is seeking. The second is outsourcing some of this work so we can get on with the task. The Deputy is correct. It is frustrating that it is taking so long.

It is important to point out that as a result of the revaluation process more companies and businesses have seen a reduction in their rates than have seen an increase. That is important if we can get the work done on the revaluation and if that trend continues. The reason that occurs is because it is the cost of the rental of one's property or group of properties relative to the actual cost throughout the local authority area and if companies can show that their rental costs have gone up relative to the average cost in the other parts of the local authority area, they will see a reduction in the rateable valuation. That is what happened as a result of the revaluations that have occurred so far.

The Government will examine any sensible amendment or proposal which would help to expedite this. However, the wider issue is that the money must be obtained, and it must be obtained in the fairest way possible. The best way to achieve that is to get these valuations over the line as soon as we can. When valuation officers come to a local authority area, they engage with the local businesses. They have information exchange days and questions and answers. They go through how the rate is struck in detail. That greatly helps in terms of revaluation.

I do not disagree with the Deputy. The retail sector is key. What we must do is gain confidence across the economy and a fundamental part of that is to keep rates down as far as possible. We must also ensure we get the funding somewhere. To do that there must be a fair system across the country. We are moving on this, because it has not been changed or amended over a period of many years. We are making progress, although I accept it is slow. As a result of that progress more businesses are seeing a reduction in their rateable valuation, and that is good news.

1:15 pm

Photo of Tommy BroughanTommy Broughan (Dublin North East, Labour)
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The next two Topical Issues are for the Minister for Health, but we do not have the Minister for Health.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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He is not here.

Photo of Tommy BroughanTommy Broughan (Dublin North East, Labour)
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It is unacceptable that the Minister for Health is not here. We are expected to argue for the abolition of Seanad Éireann yet Ministers are not prepared to attend a Topical Issues debate. That is absolutely unacceptable. It is something we must take up with the Ceann Comhairle and with the House. I will suspend the sitting for five minutes to get the Minister for Health.

Sitting suspended at 4.13 p.m. and resumed at 4.18 p.m.