Willie Penrose (Longford-Westmeath, Labour)
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218. To ask the Tánaiste and Minister for Justice and Equality if his attention has been drawn to the fact that 56% of retail shops in County Westmeath have experienced an increase in rates following the revaluation process whilst 39% will experience a reduction; his views on whether such levels of increases will lead to the widespread closures of local shops especially in rural areas; his plans to ameliorate or deal with these excessive increases; and if he will make a statement on the matter. [41871/17]

Charles Flanagan (Laois, Fine Gael)
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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.

As the Deputy has referred to rates, it is important to state that the position regarding the payment of rates is that, under Irish law, there is a distinct separation of function between the valuation of rateable property and the setting and collection of commercial rates. 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 the local authority. The latter is a reserved function of the elected members and the Commissioner has no function in this regard.

Having a modern valuation base is very important for the levying of commercial rates on a fair and equitable basis across all economic sectors including commercial retail units. This has been the policy of successive Governments for many years and is the express purpose of the National Revaluation Programme now being rolled out by the Valuation Office. The current phase of the national revaluation programme (known as “REVAL 2017”) covers the revaluation of all rateable properties in counties Longford, Leitrim, Roscommon, Westmeath, Offaly, Kildare, Sligo, Carlow and Kilkenny where a revaluation is being undertaken for the first time since the nineteenth century. It also includes the second revaluation of the South Dublin County Council area. Revaluation in these counties was completed in September 2017 and will become effective for rating purposes from 2018 onwards.

The revaluation provisions in the Valuation Acts 2001-2015 provide for the revaluation of all rateable property within a rating authority area so as to reflect changes in value due to economic factors, differential movements in property values or other external factors such as infrastructural changes in the vicinity of a property and changes in the local business environment. The National Revaluation Programme is the first revaluation of all rating authority areas in over 150 years and is being conducted across the country on a phased basis. This is a welcome development which is long overdue and on which considerable progress has been made. Revaluation is an important instrument in redressing historical anomalies in relation to commercial rates for both urban and rural properties and between particular classes of property within a local authority area.

Following revaluation there is a much closer and uniform relationship between contemporary rental values of all rateable properties in a local authority area and their respective commercial rates liabilities. In essence, the exercise aims to ensure that each ratepayer bears a fair share of the rates burden relative to the modern rental value of the property that they occupy. This applies to retail shops as it does to all other categories of property. A key element of revaluation is to remove anomalies in the system where they exist and establish fair and equitable relativities between the various property classifications.

A valuation for commercial rates purposes is an estimate of the Net Annual Value (NAV) of a property, at a specified valuation date, on the assumption that the occupier is responsible for the payment of commercial rates and for insuring and maintaining the property. The term “net annual value” has a legal definition and is set out in section 48 of the Valuation Act 2001 as “the rent for which, one year with another, the property 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 payable in respect of the property, are borne by the tenant”.

Estimating the NAV of a rateable property is an evidence-based exercise. In this regard, I am informed that the Valuation Office analyses relevant market rental transactions for all rateable properties including retail shops in accordance with the legislation, best practice internationally and well-established valuation principles and case law arising from the independent Valuation Tribunal and the higher Courts and the conclusion drawn from that analysis is applied to similarly circumstanced property using the “comparative” method of valuation which, as the name implies, employs direct comparison with other similar properties.

While some final Valuations Certificates issued as part of REVAL 2017 may result in increases in the rates liability of various property types, including some retail shops, possible reasons for such increases where they occur would be that the valuation of some of these properties had not been revised to take account of improvements, extensions or extensive refurbishment that was not reflected in the valuation immediately before the revaluation that is now in train. I am advised by the Commissioner that the revaluation conducted by the Valuation Office in County Westmeath is likely to result in about 56% of ratepayers having their liability for rates reduced and about 39% having an increase with the remaining 5% of properties covering two categories, i.e. property whose rates liability will remain unchanged and some new properties which have been added to the valuation list for the first time.

With specific regard to the retail sector, the number of ratepayers expected to have reduced rates liability in 2018 will be of the order of 39% with 56% getting an increase. In the case of those getting an increase, about a quarter will get a valuation increase in the lower range, i.e. 5% to 20%. The percentage figures reflect the relative rental growth in some retail property vis-à-visother property categories such as office and industrial property. In County Westmeath 79% of ratepayers occupying industrial property and 60% of ratepayers occupying office property will have a reduced rates liability post revaluation.

There is an extensive process of redress available to ratepayers who are dissatisfied with the valuations they have received from the Valuation Office. Firstly in this regard, a dissatisfied person could have made representations to the Valuation Office within 40 days of the date of issue to them of the certificate of the proposed valuation earlier this year. The Valuation Office considered the representations which were received and made any changes to the valuations that were necessary. These changes were reflected in the final certificates of valuation which was issued to ratepayers on 7^thSeptember 2017. Any ratepayer who is still dissatisfied with the final valuation which has been placed on their property following consideration of the representations, have a right to lodge a formal appeal with the Valuation Tribunal, which is an independent statutory body established for the purpose of hearing appeals against decisions of the Commissioner of Valuation. The final date for receipt of appeals by the Tribunal is 12^thOctober 2017 and each ratepayer has been informed of this statutory deadline.

I am aware that certain business owners have stated that they face higher rates bills in 2018. However, it is not the purpose of revaluation to increase or decrease the total amount of commercial rates collected by local authorities but rather to ensure that the valuations used for rating purposes are up-to-date and reflect current market conditions. As a consequence, it is a fact that some ratepayers have seen the rateable valuation of their property increase while other ratepayers have seen a decrease.

Section 56 of the Valuation Acts 2001 to 2015, as amended by section 8 of the Local Government (Business improvement Districts) Acts 2006, provides that the Minister for Housing, Planning and Local Government can make an order directing a rating authority to limit the overall amount of income it could raise through rates in the year following a revaluation to the total amount of rates liable to be paid to it in the previous year, adjusted for inflation. Rate limitation orders have been made in each of the local authorities that have undergone a revaluation to date and I understand that my colleague, the Minister for Housing, Planning and Local Government intends to make further orders later this year in respect of rating authorities which have recently undergone revaluation.

In recent years, local authorities have been asked by the Minister for Housing, Planning 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 including the retail trade and will continue to keep all matters relating to rates under regular consideration and is determined that every avenue will be pursued to optimise efficiency, and contain and reduce costs in the local government sector.