Ciarán Lynch (Cork South Central, Labour)
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66. To ask the Minister for Public Expenditure and Reform if he will respond to concerns raised in correspondence (details supplied) regarding the Valuation (Amendment) (No. 2) Bill 2012; and if he will make a statement on the matter. [45557/14]

Brendan Howlin (Wexford, Labour)
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In addressing the two main issues which have been highlighted in the correspondence to which the Deputy refers, the following is the position regarding the proposition that economic factors should be taken into account when valuing real property for rating purposes and the requirement for regular revaluations.

Firstly, the Valuation Act, 2001 currently provides for the rateable valuation of relevant properties within a rating authority area to be reviewed periodically to reflect changes in value arising from economic factors. The resultant valuations are all published on the same date and become effective for rating purposes at the same time. This process of revaluation is provided for under section 19 of the Act.If there are changes in rents between revaluation dates then this may be reflective of a general downward movement in rents. If all rents that were reduced resulted in changes on the valuation list then this would not necessarily result in a reduction in rates. This is because the amount of rates collected is a function of the Annual Rate on Valuation set by the Local Authority multiplied by the valuation of a property on the valuation list. Valuations could go down but the ARV would increase and there may be no change to the rates amount due. The revaluation of all properties in a rating authority area takes place no sooner than 5 years and no later than 10 years after the first revaluation has taken place. For example the next revaluation of South Dublin will be completed before the end of 2017. This is also the standard model in other jurisdictions with an annual property charge similar to rates and is provided for in section 25 of the Act.As regards the assumption  about delays underlying the concerns raised with the Deputy,I have no reason to believe  at this stage that the revaluations will not be completed on time.

A separate process called revision of valuation provides for the value of an individual property to be amended or revised where a "material change of circumstances" has occurred in relation to the property. Such a revision may only take account of purely structural alterations to a property or the subdivision of a property into two or more separate properties or the amalgamation of a property with one or more other rateable properties. A review of valuation of an individual property arising from a change in economic circumstances would not be in keeping with the principles of valuation of real property in this or indeed in other jurisdictions which have a developed code of property valuation.

Any alternative would introduce significant volatility into the rating system, which yields in the region of  €1.3bn annually in funding to local authorities, would further delay the national revaluation programme, would be very challenging to implement and would more than likely result in the introduction of an economic valuation system no longer based on property valuations but would become a type of economic audit of the business sector totally unsuitable for application as a base for local government funding. There must be an appropriate balance between the costs of  rates for SMEs and the availability of adequate levels of funding to local authorities for the provision of essential local services enjoyed by SMEs and others.

It is imperative to maintain certainty and predictability for ratepayers, local authorities and other stakeholders between revaluations which is a fundamental principle of the rating system. Fluctuations in the economic performance of a company or other entity in occupation of a property would not be measurable in a real estate context and would prove impossible to implement in a fair and equitable way. The physical characteristics and features of a property are the only criteria that can be surveyed and quantified and which form a uniform basis for rates. The use of economic factors such as business values and buoyancy may be used for the assessment of other taxes such as VAT and corporate taxes but are not considered to be suitable as a basis for a local property tax.

However, I accept  there may be limited circumstances where, because of the restrictive nature of the "material change of circumstances" provisions in the 2001 Act, it may be appropriate to amend a valuation, e.g. where an error occurred, or where a property has been adversely affected by infrastructural development in its vicinity and where the overarching valuation principles of equity and uniformity would ordain that such a revision should be carried out.Should such an eventuality occur, there is now, for the first time, provision in the Valuation (Amendment) (No.2) Bill, 2012 for the Commissioner of Valuation to address such anomalies. This measure, introduced in response to submissions made by stakeholders during the consultation process, has been roundly welcomed.

The Bill, which was initiated in the Seanad, recently passed Report and Final Stages in that House and will now proceed to the Dáil for its consideration.