Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I am pleased to have the opportunity of introducing the Second Stage reading by Seanad Éireann of the Valuation (Amendment)(No. 2) Bill 2012. As Senators will be aware, the proposed amendments are designed to accelerate the national programme of revaluation of all commercial and industrial properties across the State, to minimise exemptions from rateability and to deal with difficulties identified in the working of the Valuation Act 2001.

A key motivation for introducing the amending legislation is to expedite the revaluation of commercial and industrial properties on a national basis. Such a comprehensive programme has not been undertaken in all rating authorities since the middle of the 19th century. However, a major start was made in recent years when all commercial and industrial properties were revalued in the county council areas of South Dublin, Fingal and Dún Laoghaire and work is also well advanced in the Dublin City Council area. The momentum of the programme was disrupted by the volatility and instability in the property market in recent years, as a result of which the Dublin city revaluation, which is a major element in the overall programme, was deferred for about 18 months. I am pleased to say that work has now advanced significantly to the stage that the first results are expected shortly.

While it is intended to roll out the programme to further local authorities later this year, there is still concern that the revaluation programme is moving at a slower pace than would have been expected. In 2001, the expectation was that the complete revaluation of all commercial property would take ten years to complete. This assumption has proved over time to be wide of the mark and hugely optimistic. The current estimate for the completion of the revaluation programme under the current arrangements is 2018. This Bill seeks to introduce a number of measures to speed up the process and includes a statutory basis for the introduction of self-assessment of valuations by ratepayers, allowing elements of the work to be outsourced, streamlining the appeals process while extending the period of consultation between the ratepayer and the commissioner, providing that only properties on the valuation list will be revalued in a local authority area.

Revaluation is all about rebalancing the overall rates burden in each local authority area and I am conscious that there is pressure for the work to proceed at a brisker pace. A substantial amount of work has been carried out to determine how the work can be accelerated. To this end, enabling provisions are included in the Bill in respect of self-assessment by ratepayers and contracting external service providers to augment the in-house capacity of the Valuation Office.

To complement these initiatives, there is provision to enable the Commissioner of Valuation to use general market data, or aggregated data, including statistical and computer-aided techniques, to estimate the net annual values of groups, classes or categories of properties, where appropriate.

The Bill updates the valuation code to accord with modern conditions. In this regard, I am keen to make the system more transparent to ratepayers and rating authorities alike. The Bill corrects several identified deficiencies in the current legislative framework based on the practical experience of those in the Valuation Office and other stakeholders working with the current legislation over the last decade or so.

The Bill aims to streamline aspects of the current appeals process. This will help to accelerate the pace at which the national revaluation programme is proceeding while ensuring in-depth engagement between the ratepayer and the Valuation Office in fixing the annual value of a property. The Bill will retain the right of appeal to the tribunal where ratepayers are dissatisfied with a valuation and to the High Court on a point of law. While the main proposed amendments, as set out in the Bill, are designed to accelerate the revaluation process, in order to minimise exemptions from rateability and to deal with existing difficulties identified in the operation of the 2001 Act to date there are other technical changes which will lead to the more efficient and optimum use of scarce resources in the Valuation Office.

This Bill has been in gestation for some years. The need for amending legislation was prompted by a study of the valuation code following ten years of working with the provisions of the Valuation Act 2001 and because of anomalies in the system that emerged as a consequence of various judgments and determinations of the Valuation Tribunal and the courts since its enactment.

The existing valuation legislation is primarily contained in the Valuation Act 2001, which provides for the valuation of all fixed property, including land and buildings. Valued is also incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The Valuation Office has responsibility for implementing and maintaining the valuation system. Rates are no longer collected on domestic property, as a result of the provisions of the 1978 Local Government (Financial Provisions) Act, or on agricultural land, as a consequence of a 1984 Supreme Court decision, although both of these categories of property are still included in the valuation lists. Therefore, the commercial and industrial sectors now effectively constitute the rateable valuation base.

The basis of assessment for valuation purposes is the net annual value, NAV, of a property. The NAV of a property is equivalent to the annual rent, exclusive of all payments in respect of rates, taxes, repairs and insurance, which a property could reasonably be expected to command. The rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, who is the tenant or the owner in certain cases. Rating authorities and ratepayers have the option of having a property listed for revision. As no national valuation has been carried out in the last century and a half, this revision process has effectively been the only way in which the valuation lists have been changed in the intervening years.

The national revaluation programme, which was provided for in the Valuation Act 2001 and which commenced in the greater Dublin area in 2005, is the first general valuation since the middle of the 19th century, and it is a significant undertaking. The Valuation Act 2001 provides that the valuation be carried out on a rolling basis. This means that each rating authority area will be separately valued as part of a planned sequential valuation of the whole country. The sequence is decided by the Commissioner of Valuation, who is independent in carrying out his function. Each rating authority area will have its own base date, by reference to which valuations will be determined.

Revaluation is a very important element in achieving uniformity of valuations within a given local authority area. It is important that such uniformity be established on a rating authority basis, whereby all valuations in a rating area will be uniform relative to one another, as distinct from having national uniformity whereby all valuations in the State would be required to be uniform. Between valuations, uniformity will be maintained on a rating authority basis and any anomalies or changes will be addressed on a rolling basis by the carrying out of a revaluation at least every ten years. Such rating authority uniformity will be much easier to establish and maintain than national uniformity, thus making it easier to ensure ratepayers will be treated equitably.

Although considerable progress has been made in recent years, there is still much that needs to be done. The present position is that, following the completion of three local authority areas in Dublin, some 18,000 properties have been revalued. While this represents only 11% of all rateable properties, it constitutes about 22% of the valuation base for levying rates. However, the current revaluation projects which are well advanced in regard to Dublin City Council and also under way in respect of Waterford and Limerick will result in a significant advancement of the circumstances, resulting in the revaluation of an additional 38,000 properties. At that stage, approximately 33% of all rateable properties will have been revalued, representing approximately 54% of the valuation base in monetary terms.

It was estimated that the overall valuation would take ten years to complete. However, because of the magnitude of the task, this timetable is unlikely to be met without employing the measures provided for in this Bill, such as self-assessment by ratepayers, the contracting of external valuation services to augment the Valuation Office's resources and the employment of computer-based methodologies. Using all these approaches, the Commissioner of Valuation will have greater flexibility to advance the revaluation programme, now that a sound foundation has been established by the largely completed revaluation of all the local authority areas in the county and city of Dublin.

It is proposed in the Bill to name specifically the State bodies that are exempted from rates. The proposal is that the definition of "office" in the Schedule to the Public Service Management Act 1997, as amended from time to time, will apply. Originally, the term "office of State" was intended to apply to a limited number of offices that are closely related to central Government and Departments of State, and was never intended to include the hundreds of public-type bodies which often operate at a considerable distance from the State. Previously, when Departments were exempt from rates, the State paid a bounty in lieuof rates to all local authorities in respect of Government property in their jurisdiction and in the mid-1980s this was merged into the equalisation fund, which later became general-purpose grants from the local authority fund. In recent years, a number of bodies, including the HSE and FÁS, took successful legal actions to be exempted from rates. This has moved the definition of "office of State" far beyond that envisaged when the 2001 Bill was enacted. It involved considerable legal expense for the Valuation Office and has impacted on the revenue collected by local authorities. During the Second Stage speech on the 2001 Act, the Government clearly stated that health boards, FÁS and the VECs would pay rates, except where exemptions applied under other provisions of the Valuation Act. Ultimately, such shortfall must be addressed through an increase in the ARV in the local authority area, resulting in an increased rates bill to other ratepayers on the valuation list. Accordingly, the intention of my proposal is to limit the exemptions to offices of State as originally intended in the 2001 Act and to prevent other non-State bodies becoming exempt.

Under the current legislation, the ratepayer has the right to make representations at revision and revaluation stage to the commissioner in regard to the proposed valuation. This was a new feature of the valuation process introduced under the 2001 Act. It is, in effect, a first-instance appeal for which no fee is payable. In addition, the traditional right of appeal to the commissioner against the decision of the revision officer was retained, as was the right of further appeal to the Valuation Tribunal. This process affords the ratepayer three opportunities to contest a valuation assessment. There is also a right of appeal to the High Court on a point of law.

In the modern context, streamlining this process is essential. It will allow the commissioner to deploy resources most efficiently in revising and revaluing properties on an ongoing basis. My officials have examined comparable appeal systems in other jurisdictions and have found that generally there are no more than two opportunities to appeal or raise an objection to a valuation assessment, while our current system effectively provides four opportunities to appeal, including the right to make representations.

The comprehensive treatment of submissions made at the representation phase, introduced by the 2001 Act, and the right to raise issues of rateability or quantum at tribunal stage has convinced me that the right of appeal to the Commissioner of Valuation could be safely disposed of without infringing the rights of occupiers of property. The Bill proposes to remove this stage. Following implementation of the proposed change, there will be an extended opportunity, from 28 days to 40 days, to make representations to the Valuation Office, followed by a right to appeal the decision to the independent Valuation Tribunal. As with all such appeals, a point of law can subsequently be appealed to the courts.

I am proposing to make enabling provisions that would allow the commissioner to assign valuation work to valuers who are not officers of the Valuation Office. Currently, the commissioner can only assign valuation work to a member of his or her staff. This amendment will allow the commissioner to engage with the private sector directly through a tendering process. This would augment the internal capacity of the Valuation Office, increase the resources devoted to the revaluation programme and accelerate the delivery of the revaluation project. The commissioner intends to carry out a pilot project on the use of external valuations. This is an innovative advance. On a pilot basis, a group of people outside the Valuation Office who have expertise in this field will work with the office to arrive at a more time-effective means of assessment.

I am also proposing to make enabling provisions in the Bill to give the commissioner capacity to introduce a self-assessment option for the valuation of commercial property. Initially, this would be done in one local authority area on a pilot basis. The Bill provides for the insertion of a new Part dealing with self-assessment. Provision is made for the commissioner to make regulations providing for the carrying out of the valuation of property by self-assessment by the ratepayer and for such option to be exercised in accordance with regulations set out in this section.

The Bill empowers the commissioner or his or her officer to make inquiries or seek information or records in order to be satisfied as to the accuracy of a valuation submitted by an occupier of a property under the self-assessment method of valuation. The officer may then enter this valuation or substitute a valuation of his or her own to the valuation list. The valuation determined will be effective for rates purposes from the effective date determined under section 7, and interest becomes payable from that date at the court rates of interest. If an occupier fails to submit a self-assessed valuation under this section, the officer will be entitled to determine the valuation of the relevant property and enter it on the valuation list. The Bill provides that failure to submit a valuation will be an offence. It will also be an offence to submit a false valuation to the commissioner knowingly or recklessly.

While I have covered the main changes, there are other proposals, many of a technical nature, for which provision is also being made. These include addressing anomalies within the current legislative system, which provides for the global valuation of public utility undertakings, enhancing the position of the Commissioner of Valuation in the area of issuing instructions to his or her officers for the purpose of maintaining equity and uniformity in the valuation list, and defining the regional fisheries board - now Inland Fisheries Ireland - as a rating authority so as to allow for its revaluation, which is not possible under the 2001 Act. It is also proposed to amend the provisions to allow the commissioner, having regard to all of the circumstances, to amend a valuation following receipt of representations where there was an earlier decision not to change the valuation because there was no material change of circumstances in respect of a property. Additional proposals include confining revaluation to updating an existing valuation list rather than valuing every relevant property situated in the rating authority area, enabling the correction of clerical errors in the revaluation list without the parties needing to go through the revision process, and linking the definition of "charitable organisation" to that set out in the Charities Act 2009.

I would like to draw the attention of the House to a possible amendment that I hope to be in a position to move on Committee Stage. As part of the establishment of the new Department of Public Expenditure and Reform, it was the Government's intention that all land and buildings previously held by the Minister for Finance would transfer to the Minister for Public Expenditure and Reform. To this end, the statutory functions under the State Property Act 1954 were transferred by SI 418 of 2011 and property related to those functions was transferred by SI 480 of 2011. However, concerns have been expressed by the Office of the Chief State Solicitor that there may be property in the ownership of the Minister for Finance that cannot be directly related to any particular statutory function and may not, therefore, have transferred from the Minister for Finance under the legislative provisions mentioned above.

To address these concerns and for the avoidance of doubt, this Department, following consultations with the Office of the Attorney General, the Office of Public Works, OPW, and the Chief State Solicitor's office, is of the view that it would be prudent at the first available opportunity to provide in primary legislation that all land and buildings previously held by the Minister for Finance be transferred to the Minister for Public Expenditure and Reform. This is being done in one fell swoop. That is what I call power.

Subject to the agreement of the House and the completion of the drafting process, it is envisaged that the necessary amendment will be included as part of this Bill as a Committee Stage amendment. It is a purely technical matter, although I suspect it might not be that technical for the Minister for Finance, Deputy Noonan, and is being proposed to provide certainty for those involved in transactions involving particular State properties.

This is important legislation. The previous Government was also working on it. The Bill has been a long time in the offing. Its provisions will make the revaluation process more streamlined, effective and clearer for the user. In the context of public sector reform, it is right and proper that we advance this work.