Barry Cowen (Offaly, Fianna Fail)
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268. To ask the Tánaiste and Minister for Justice and Equality if his Department or a body under its aegis has explored the prospect of applying commercial rates to development sites with or without a building or structure zoned as suitable for non agricultural development including commercial, industrial, residential and mixed land use; his views on whether this could be a means of introducing a site value tax to reduce land hoarding and reduce speculative investment in development land; and the estimated revenue intake from such a tax. [32217/17]

Charles Flanagan (Laois, Fine Gael)
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I can inform the Deputy that the position regarding the determination of commercial rates under Irish law is that rates are essentially a charge on the occupation of property where the occupier is liable for payment unless expressly exempted under the terms of Schedule 4 of the Valuation Act (as amended). Accordingly, rates are levied on a very wide range of commercial and industrial properties, including sites with or without buildings provided the property is capable of beneficial occupation. However, as the Deputy will be aware, the exemptions from commercial rates generally include properties such as domestic premises and those used for public religious worship and certain premises used for education and for the purpose of caring for the sick, elderly, handicapped and disabled.

The basic premise under the Valuation Acts 2001 to 2015 is that all interests including buildings and lands used or developed for any purpose (irrespective of whether such lands are surfaced) and any constructions affixed thereto are rateable unless expressly exempted under Schedule 4 of the said Acts.Specifically, Schedule 3 of the Valuation Act 2001 provides a list of relevant property for the purposes of valuation which includes “lands used or developed for any purpose (irrespective of whether such lands are surfaced) and any constructions affixed thereto which pertain to that use or development.” This provision would cover certain yards without buildings and development sites which are in beneficial occupation and accordingly liable for commercial rates.

It is the function of the Commissioner of Valuation to determine whether properties are liable for or are exempt from rates. The Commissioner is independent in the exercise of his functions under the Valuation Acts, 2001-2015 and the making of valuations for rating is his sole responsibility and the statutes do not accord me any function in this regard.

Operationally, there is a distinct separation of function between the valuation of rateable property and the setting and collection of commercial rates. As the Deputy will appreciate, the amount of rates payable by a ratepayer in any calendar year is a product of the valuation set by the Commissioner of Valuation, multiplied by the Annual Rate on Valuation (ARV) decided annually by the elected members of each local authority. The Commissioner of Valuation is independent in carrying out his functions under the Valuation Acts 2001 to 2015 and my Department has no role in this regard. On the other hand, the annual setting of the ARV is a reserved function of the elected members of each Local Authority and the Commissioner of Valuation has no function in that regard.

The basis of rateable valuation for all property is “net annual value” and is set out in Part 11 of the Valuation Act, 2001. Net annual value is the rental value for which one year with another, the building might, in its actual state, be reasonably expected to let from year to year, on the assumption that the probable average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that state, and all rates and other taxes in respect of the property, are borne by the tenant of the property.

Regarding the Deputy’s reference to the considerations relating to the possible introduction of a site-value tax, this question raises complex taxation policy issues, the determination of which would be a matter for Government as a whole. There are varying points of view both nationally and internationally on this matter. For instance, the 2009 Report of the Commission on Taxation did not make any recommendations for the adoption of a site-value tax in the course of its extensive examination of options for local government funding. On the other hand, the National Competitiveness Council had a contrary view in 2015 when in a series of recommendations in the Council’s assessment of competitiveness challenges facing the country, recommended the possible replacement of commercial rates with a new Site Valuation Tax that would also extend to unused development land, replacing the vacant sites tax. These contrary viewpoints are illustrative of the complexity of the issues and the conflicting arguments for and against the introduction of a site valuation tax which the Government is keeping under review. Of course tax policy is primarily a matter for my colleague the Minister for Finance.

The Deputy will note that one of the recommendations in the Commission on Taxation Report was that the implementation of a modern valuation base for the commercial rates system should be advanced as a matter of priority. I wish to confirm that this recommendation is being addressed through the acceleration of the National Revaluation Programme currently underway under the direction of the Commissioner of Valuation. As the Deputy will know, the programme has already been completed in six local authorities and another ten local authorities will have been revalued by September 2017. I have been informed that the Commissioner intends to extend the programme to a further seven local authorities later this year and the final phase of the programme will commence in 2019. The provision of a modern valuation base to underpin the setting and collection of commercial rates is a very welcome development.