Brendan Griffin (Kerry South, Fine Gael)
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238. To ask the Minister for Public Expenditure and Reform if he will move away from the premises linked rates calculation system for business and instead implement a profit linked system in order that businesses that can afford to pay rates pay proportionate to their performance and businesses that are struggling or new emerging businesses have less of an obstacle to survival; and if he will make a statement on the matter. [27327/14]

Brendan Howlin (Wexford, Labour)
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The basis of rateable valuation for all property is "net annual value", i.e. the rental value of the property and is set out in Part 11 of the Valuation Act, 2001.  In accordance with well established valuation principles and case law, various methodologies may be used in estimating the net annual value (NAV)/rental value of the property.  The most common methodology used is direct comparison with other similar properties in the same rating area.  Changing the basis of assessment from net annual value/rental value to business profit or trading performance as such would most likely change individual ratepayer liabilities and would fundamentally change rates from being a local commercial property charge to a local business tax based on profit.

The levying of rates on commercial property by reference to profit rather than valuation would be a significant change and a departure from the long-standing practice of levying rates by reference to property values.  There are already taxes in place which are levied on business turnover/profit, i.e. VAT and income/corporation taxes and the adoption of such a system for rating purposes would not be suitable because turnover and profit can vary significantly from year to year and within and between the various business sectors which would lead to an unstable and volatile valuation base. Therefore, I have no plans to change the method by which valuations are assessed for rating as such a radical move would represent a significant departure from the long-standing practice of levying rates solely by reference to property values.

It is important to acknowledge that commercial rates, as a source of revenue, and the rating system generally, are deeply embedded in the local government system. Rates income is a very important contribution to the cost of services provided by local authorities such as roads, public lighting, development control, parks and open spaces.  All rates collected within a local authority area are spent exclusively in delivering the public services which are required locally to create the environment in which businesses can prosper. Locally elected members adopt the annual rate on valuation (ARV) they consider necessary in order to provide the required services. Rates are a stable source of financing for local government which is not affected unduly by short-term changes in economic circumstances.  A system having regard to economic factors on an ongoing basis would create uncertainty by providing for continuous change to the valuation base. Such a system would not provide a stable basis for funding local government and would require significant additional resources to operate.

In recent years, local authorities have been asked by the Minister for the Environment, Community and Local Government to exercise restraint in setting the Annual Rate on Valuation (ARV) and they have responded positively in this regard.  The Government recognises that these are difficult economic times for many businesses. It will continue to keep all matters relating to rates under regular consideration and it is determined that every avenue will be pursued to optimise efficiency, and contain and reduce costs in the local government sector.