Brendan Griffin (Kerry South, Fine Gael)
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Question 34: To ask the Minister for the Environment, Community and Local Government his plans to overhaul the system of commercial rate calculation for small and medium-sized enterprises; if he will consider abolishing commercial rates for small and medium sized enterprises and replacing rates with a levy on profits; if he will utilise domestic water and property-related charges to reduce the burden on small and medium-sized enterprises of funding local authorities; and if he will make a statement on the matter. [37432/11]

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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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. The Annual Rate on Valuation (ARV), which is applied to the valuation of each property, determined by the Valuation Office, to obtain the amount payable in rates, is decided by the elected members of each local authority in the annual budget and its determination is a reserved function.

The Commissioner of Valuation, who has sole responsibility for all valuation matters, is conducting a programme of revaluation of all commercial and industrial properties throughout the State on a county by county basis. The purpose of the revaluation process is to update commercial valuations which will assist in providing a more equitable distribution across those liable to pay rates.

The Commissioner, in consultation with my colleague, the Minister for Public Expenditure and Reform, has been reviewing various options for streamlining the valuation process and speeding up the national revaluation programme. The Minister for Public Expenditure and Reform intends to bring proposals for a Valuation Bill to Government shortly.

A property-based tax has a distinct advantage over any tax based on profits or incomes as it is generally found 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. This would not provide a stable basis for funding the local government sector and would require significant additional resources to operate.

It is recognised that the existing revenue base of local authorities is narrow by international standards. This was a consideration in the introduction of the €200 charge on non-principal private residences in 2009. A further broadening of the revenue base for local government will be achieved as a result of the introduction of the household charge in 2012 as required under the EU/IMF programme of financial support for Ireland.

The EU/IMF programme also includes a commitment to introduce water charges for households. The Programme for Government provides for the introduction of a fair funding model to deliver clean and reliable water and envisages that charges will apply to usage above a free allowance. My Department is currently preparing a strategy to implement these proposals. Further details will be announced following the Government's consideration of the proposals.

I recognise that these are difficult economic times for many businesses. I will continue to keep all matters relating to rates under regular consideration and I am determined that every avenue will be pursued to optimise efficiency, and contain and reduce costs in the local government sector.