John Perry (Sligo-North Leitrim, Fine Gael)

I thank Senator Bradford for raising this very important issue which does have an impact on small companies. I apologise on behalf of the Minister for the Environment, Community and Local Government, Deputy Hogan, who cannot be present.

Commercial rates income is a very important contribution to the cost of local services provided by local authorities such as roads, public lighting, development control, parks and open spaces. All commercial rates collected in a local authority area are spent exclusively on providing services in that area. The Valuation Act 2001, which sets out the categories of properties that are rateable and not rateable, comes under the remit of my colleague, the Minister for Finance, Deputy Michael Noonan.

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 levying and collection of rates are matters for each individual local authority and the setting of the annual rate on valuation, ARV, is a decision taken locally by elected members. Rating law provides for the making of a single ARV and there is no provision for a different ARV to be applied to different premises.

It should be borne in mind that while varying the ARV for certain businesses might be a boost for those businesses, it is likely to have a negative impact on other ratepayers who would be faced with higher rates bills to make up the shortfall in the local authority's rates income. This would be an unfair approach at a time when many businesses are faced with challenging circumstances. Local authority financing from all sources, including rates, motor tax income, Exchequer funding and local charges, is under pressure at present and it is highly unlikely that a local authority would be able to absorb any shortfall in rates income arising from the introduction of such a proposal. It is also the case that it could be problematic on a general level and could have implications for both state aid and EU competition rules.

The Government is focussed on reducing the costs of doing business to support competitiveness and employment in the economy and to protect the interests of communities. This year and in recent years, the Department of the Environment, Community and Local Government has requested local authorities to exercise restraint in setting commercial rates to support competitiveness in the economy and to protect the interests of communities. Local authorities have responded positively to these requests. Across the 88 local authorities, annual rates on valuation declined by an average of 0.64% from 2010 to 2011.

We are acutely awareof the pressures on small and medium-sized businesses and the challenging economic environment in which many business owners are operating at the present time. While the Minister, Deputy Hogan, has no immediate plans to conduct a review of the rating system generally, he is determined that every avenue will be pursued to optimise efficiency and certain costs in the local government sector. The Minister is also considering proposals in the area of local government rates, charges and supports to enterprise generally to assist small and medium-sized enterprises.

I thank the Senator for raising this very important matter. It is the issue of local charges that impact on the viability of small companies and the Minister is very conscious of this. I assure the Senator that this will be a huge consideration in the review of the efficiencies of local government.