Malcolm Byrne (Fianna Fail)
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I thank the Minister of State for taking this Commencement matter. The model of commercial rates that we operate in this country can be traced back to legislation dating from 1826, the time of King George IV. At that time, income tax was not even in place. Income tax had been introduced as a temporary measure during the Napoleonic Wars but it did not come back into Britain and Ireland in any real way until the 1840s. Essentially the model that was introduced in Ireland in the 1820s and 1830s as a way of funding local government has not really changed. We still operate the same commercial rates model under which local government is funded based on the size of the shop floor. It is calculated in two ways and the only way that can be changed is when the Valuation Office carries out a revaluation, which happens periodically, or the local authority decides to change the multiplier.

That system was fine in the 1800s but we are in a very different era now. We have moved to a situation where e-commerce now accounts for 50% of all card spending in this country. The pandemic has accelerated the use of credit and debit cards for transactions. What I am asking for here is a level playing field. If we want to ensure that our main street and high street shops, which are also supporting local community activities, survive and if we want to continue to support that retail experience, we must develop a fairer system of funding local government. It is not fair, for instance, that bookshops, of which there are approximately 230 all over the country, are paying commercial rates to their local authority while the largest bookseller in Ireland, Amazon, does not pay commercial rates and will not do so until it opens a warehouse here. This is a question of ensuring a level playing field.

Commercial rates are an important element of funding for local government. Approximately €1 in every €3 contributed towards local government comes from commercial rates, exceeding €1.5 billion every year. Regardless of what new system we put in place, we must continue to fund local government properly and I passionately believe in doing that. During the period of the pandemic the Government has been very good in providing business supports, particularly through commercial rates waivers. However, we are now in a new world where transactions are increasingly being carried out over phones and tablets. That is great in that it gives us a lot more freedom but if we are going to encourage urban renewal and town regeneration, in which the Minister of State is a passionate believer, then we must ensure that those businesses that are offering the main street and high street experience are competing on a level playing field. The model that we have at present does not allow for that. The booksellers are the classic example. They contribute to their communities by sponsoring local sports clubs, arts groups, Tidy Towns committees and so on but they are also subject to commercial rates. We do not see Amazon's logo emblazoned across the jerseys of local soccer or GAA teams. As we emerge from this pandemic and place a greater emphasis on urban regeneration, I ask that we give a fair deal to those small retailers and consider proper local government funding and reform of the commercial rates model.

Malcolm Noonan (Carlow-Kilkenny, Green Party)
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Like the Senator, I strongly believe in strong and well-funded local government, having spent 16 years of my public life as a member of a local authority. The issue he has raised is important. As he will be aware, local authorities are legally obliged to levy rates on any property used for commercial purposes. Indeed, commercial rates are the single greatest source of income for local authorities, with that income supporting the provision of essential local services. When preparing their budgets for 2021, local authorities budgeted collection of €1.67 billion in rates from approximately 150,000 commercial and industrial properties. This equates to 29% of the overall projected revenue for 2021, although the figure varies by local authority. The continuing impact of Covid-19 for all society and business may have a significant effect on these estimates.

In 2020, to support businesses and ratepayers and in recognition of the impacts of Covid-19, the Government funded the cost of a commercial rates waiver for nine months. This unprecedented measure offered support to businesses, as well as financial certainty to local authorities, and cost €730 million. The Government is currently funding a more targeted rates waiver, with modified criteria, for the first six months of 2021, with an expected cost of €320 million. It will equate to a total cost to the Exchequer of more than €1 billion.

The Local Government Rates and other Matters Act 2019, which modernises rates legislation and practice, was passed by the Oireachtas and enacted in July 2019. Plans to commence the legislation and introduce necessary regulations have been delayed due to the impact of the Covid crisis and work on the Government-funded rates waivers. The commencement of the provisions of the 2019 Act is an important element of our commitment in the programme for Government to examining ways to further streamline the commercial rates system post Covid-19.

A property-based charge such as commercial rates has a distinct advantage over sales-based taxes or any tax based on profits or incomes, as it is generally found to be easy to collect and difficult to evade. Rates are levied on any property used for commercial purposes, making no distinction as to whether that commercial activity is online. In that context, there is no intention to alter significantly the commercial rates model.

The trend of customer transition from bricks and mortar shops to online retail is acknowledged and is a matter for taxation policy consideration by my colleagues in the Department of Finance. I support the need to protect footfall on our streets and in towns and city centres. I acknowledge it is vital to ensure that rates continue to contribute to a stable basis for funding local government and not least to the cost of services provided by local authorities such as public lighting, development control, parks and open spaces, all essential elements to create the environment in which communities can prosper.

I take on board the argument made by the Senator. The issue he raised relating to booksellers is important. My colleague, the Minister of State with responsibility for public procurement, is in the Chamber. Being able to provide contracts to local booksellers and suppliers for libraries and so on is an important part of it. Local authorities will have to give consideration to other mechanisms for raising revenue, such as setting up energy supply companies or getting involved in public banking, something we have been raising for years. Perhaps they could even levy out-of-town car parking to bring funding back into town centres. There is no doubt we have a significant challenge into the future but we can collectively address it. The Town Centres First policy will deliver significant impacts by providing a suite of options to support town centres and people returning to them. These are important elements to be added to the revenue and income streams for local government.

Malcolm Byrne (Fianna Fail)
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I have no doubt as to the Minister of State's commitment on this issue but the shift is going to be very dramatic over the next decade. The pandemic has simply accelerated the speed at which we engage online. Travel agents, for example, are very much a minority, with more than 99% of travel transactions booked online. If we are to protect the retail experience, we cannot have a system of funding local government that is based simply on the size of the shop floor.

This has been a problem in rural areas. Large rural pubs, for instance, have been subjected to very high levels of commercial rates and that has threatened their viability. It is simply about levelling the playing field. If somebody is selling something, they should be contributing in the same way to our communities. I appreciate this is a broader taxation question but it is completely unfair that the bookseller on a main street or high street, who contributes directly to the local community, has to pay commercial rates, yet a large multinational does not have to pay for the same services.

Malcolm Noonan (Carlow-Kilkenny, Green Party)
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The Senator has our commitment that we will bring forward the Local Government Rates and other Matters Act 2019, recognising the need for change. I reiterate that not all local authorities are as reliant on rates revenue as others. In Fingal, for instance, it accounts for 51%, whereas in a county such as Leitrim, it is about 16%, so there is considerable disparity. It is important that we examine alternative revenue-raising mechanisms for local government, be it public banking or a levy on out-of-town car parking, to channel funding back into town centres. It could also involve setting up energy supply companies to supply renewable power to developments and large users of electricity. There are other mechanisms whose potential in local government we need to unlock to provide it with sustainable and viable income streams over the coming years and beyond.