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Dáil Éireann debate -
Thursday, 15 Feb 2001

Vol. 530 No. 5

Valuation Bill, 2000: Second Stage.

I move: "That the Bill be now read a Second Time."

This Bill is long overdue, being the first comprehensive valuation legislation introduced since the 1850s. It is designed to improve, streamline and modernise the operation of the valuation system which was the basis for the collection of £456 million in local authority rates in 2000. The new legislation removes deficiencies that have built up over the years in the valuation system, brings the system into line with the contemporary commercial environment and makes it more transparent and equitable for the ratepayer.

A key motivation for introducing the legislation is to allow a revaluation of commercial and industrial properties to take place in all rating authority areas over a period of years. A national revaluation has not been undertaken since the middle of the 19th century. The world has changed a lot since then and the bulk of the existing legislation was not designed to deal with the rapid pace of expansion, development and change that is a feature of our modern economy. A revaluation will allow a uniform and equitable valuation base to be established and anomalies to be removed. It will facilitate a return to the use of full net annual values rather than the confusing fractions arrangement that is operated at present.

Provision is being made for regular revaluations to be undertaken in all local authority areas. This measure will ensure that valuations are kept in line with changes in market values and provide for fairness and equity between ratepayers. Furthermore, the new legislation enhances the opportunities for ratepayers to be involved in the valuation process from an early stage. In addition to retaining the existing multi-tiered appeals system, it introduces a new consultative phase at the initial stage of the valuation process. The consultative phase means that, in future, ratepayers will be notified of the Valuation Office's proposed determination in respect of their property before it becomes effective for rating purposes. Ratepayers will then be given an opportunity to make a submission to the Valuation Office about that determination if they so wish. The Valuation Office is obliged to take a submission into account before the valuation certificate is issued and the valuation list amended or published.

I assure the House that increasing local authorities' rates income through a revaluation is not the purpose of the new legislation. In order to put this beyond doubt, provision is made for the capping of the increase in the overall rates income of a rating authority area in the year in which the first revaluation is used for rating purposes to the increase in the consumer price index.

The Bill is comprehensive legislation which provides for the repeal of existing valuation legislation and its replacement by modern legislation for those elements of the current valuation system it is proposed to retain and a revaluation of all rateable property in the country on a rolling basis, that is, the revaluation of individual rating authorities in a planned sequential manner. The whole country is to be revalued over a period of five years and there will be subsequent revaluations at regular intervals thereafter.

The Bill also provides for the continued use of net annual value as the basis of valuation and a return to the use of full NAV and the continued exemption from rates of a wide range of properties currently exempt for rates. Such properties include domestic property, agricultural land and non-residential farm buildings, State occupied property, land developed for forestry, horticulture or sport, non-commercial and State funded hospitals and other treatment and care facilities, non-commercial and State funded educational undertakings such as national, vocational, and secondary schools, places of public worship, public parks, lighthouses and non-commercial graveyards, certain properties of a cultural nature, such as non-commercial art galleries, museums, libraries, national monuments and any legally designated national cultural institutions, property used for the advancement of pure science or literature or the fine arts, property used by charitable organisations exclusively in a non-commercial manner for charitable purposes and property occupied by An Taisce. The Bill further provides for the continued exemption of bed and breakfast accommodation and self-catering accommodation from the rating system.

The main changes proposed in the rates base are the rating of the administrative offices of health boards and Teagasc, the full rating of all harbours, except those in State occupation, confirming the rateability of VEC offices and the rating of those non-commercial State-sponsored bodies and agencies not already paying rates, such as An Bord Pleanála; the current fixed term relief from rates for the mining and land based petroleum extraction industries is being abolished, an exemption from rates for property used to breed and rear fish is being applied, the extension of the current exempt status enjoyed by most schools on the basis that they are not established or conducted for profit and/or are State funded, to those universities or other third level institutions on the same basis, which are not already exempted from rates, repealing the existing arrangements for valuing Irish Rail and allowing for the option of globally valuing that organisation.

The Bill also provides for the streamlining of the valuation process and providing ratepayers with a formal opportunity to be heard in the process of determining rateable valuations, enhanced powers for the Valuation Office to obtain information relevant to the valuation process and to obtain access to property for valuation purposes, the continued use and updating of existing valuation lists until such time as new valuation lists are made available from the initial revaluation proposed in the Bill and giving the Minister for the Environment and Local Government the power to specify the maximum rates income for local authorities in the first year in which a revaluation is effective for rating purposes. I have indicated that the consumer price index is the guide in this regard. In addition, the Bill re-enacts various provisions relating to the Commissioner of Valuation and the valuation tribunal.

This Bill has been in gestation for a number of years. An interdepartmental review of the rateable valuation system was undertaken by the Department of Finance, the then Department of the Environment and the Valuation Office in 1995. This review was prompted by the need to carry out a thorough study of the valuation system and to consider options for improving it before any work commenced on comprehensive valuation legislation. The findings and the recommendations of the review group have significantly influenced the drawing up of the Valuation Bill.

Existing valuation legislation provides for the valuation of all fixed property, including land and buildings. Also valued is incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The Valuation Office has responsibility for the rating valuation system. Although rates are no longer collected on domestic property as a result of the provisions of the 1978 Local Government (Financial Provisions) Act, or on agricultural land as a consequence of a 1984 Supreme Court decision, nevertheless, both categories of property are still included in the valuation lists. At this point the commercial and industrial sector effectively constitutes the rateable valuation base.

The basis of assessment for valuation purposes is the net annual value of a property. The NAV of a property is equivalent to the annual rent, exclusive of all payments in respect of rates, taxes, repairs and insurance which a property could reasonably be expected to command. The unit of assessment is the rateable hereditament, a hereditament being a property capable of inheritance. The rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, that is, the tenant or the owner in certain cases.

Both rating authorities and ratepayers have the option of having a property listed for revision. As no national revaluation has been carried out in the last century and a half, this revision process is effectively the only way in which the valuation lists were changed in the intervening years.

The principal recommendation made by the interdepartmental review group was that a revaluation of all rateable property should be undertaken. The primary objectives of such a revaluation are to remove anomalies in the valuation lists, to establish a uniform and equitable valuation base and to lessen the risk of any eventual challenge to the valuation system. Anomalies are widespread in the valuation lists. This is principally because no national revaluation has been carried out since the national valuation of all property in Ireland undertaken between 1852 and 1865. The rateable valuation of a property had been intended to be equivalent to its NAV but, over time, the rateable valuation increasingly represented a smaller and smaller fraction of the NAV.

It is important to update the valuation lists to eliminate any anomalies as they form the base on which a substantial part of locally raised revenue for local government is levied. This will be done through a national revaluation based on the new legislation. The proposed revaluation, the first general revaluation since the middle of the 19th century, will be a significant undertaking. Accordingly, the Bill provides that the revaluation be carried out on a rolling basis. This means that each rating authority will be separately revalued as part of a planned sequential revaluation of the whole country. The sequence will depend on the Commissioner of Valuation's judgment as to which rating authorities are most in need of a revaluation. Each rating authority will have its own base date by reference to which valuations will be determined. Uniformity between valuations will be established on a rating authority basis, whereby all valuations in a rating district will be uniform relative to one another instead of having a national uniformity, that is, where all valuations in the State would be required to be uniform with one another. Between revaluations, uniformity will be maintained on a rating authority basis. Such rating authority uniformity will be easier to establish and maintain than a national uniformity, thus making it easier to ensure ratepayers will be treated equitably. It is estimated that the revaluation will be completed in about five years and will be more easily and safely managed under the approach of a rolling revaluation which was also favoured by the interdepartmental review group. Under this approach, the Commissioner of Valuation will have the power to make an order for the revaluation of a particular rating authority. The base date, by reference to which valuations will be determined, will be designated in the commissioner's order and will be specific to that rating authority.

A revaluation will impact on ratepayers in two ways. First, the rateable valuation base is likely to be redistributed within the rating area, with some ratepayers' bills increasing and some ratepayers' bills decreasing. Second, the rateable valuation of a ratepayer's property will no longer be expressed in terms of a fraction of the property's net annual value, but in terms of the property's full net annual value.

A revaluation by itself will not increase the overall rates take by a rating authority. The rates take will be determined by the rate in the pound struck by the rating authority after a revaluation. A cap will be placed by the Minister for the Environment and Local Government on the increase in rates income allowed in the first year in which the revaluation takes effect. However, a revaluation will lead to a redistribution of the rates burden between ratepayers, reflecting changes in the property market that have taken place over the years. The different rates of increase in rental levels between different categories of property and between different locations in a rating authority will have an impact on the outcome of the revaluation. The proportion of rateable properties in a rating authority represented by the different categories of rateable property, such as retail or industrial property or office accommodation, will also affect the outcome of a revaluation. Because of the multiplicity of relevant factors involved, the precise effect of a revaluation on individual ratepayers' rates bills cannot be indicated before the revaluation has been completed.

As I have already indicated, rateable valuations will be expressed in terms of full net annual value, with effect from the first revaluation, instead of the current practice of using fractions of NAV. A return to full NAV was recommended by the interdepartmental review group as a means of improving the ease of comprehension and transparency of the valuation system and as the most appropriate basis of valuation for commercial and industrial property. The concept of NAV has been used since the inception of the valuation system in both Ireland and Great Britain. When the valuation system was reformed in England, Scotland and Northern Ireland, NAV was retained as the basis of valuation. The continued use of annual values have several advantages: both ratepayers and valuation practitioners are familiar with the concept and use of NAV in determining rateable valuations; the concept and use of NAV are familiar also to the courts; there is a lot of readily available evidence on which NAV can be based; and annual values are generally sufficiently stable to provide a predictable and reliable revenue base for rating authorities.

It is considered that a return to using full NAV may cause the level of rateable valuations to increase on average by the order of 300 fold. However, the increase on individual properties will vary considerably. To take an example for illustrative purposes, a property with a rateable valuation of £100 under the present arrangements could have a rateable valuation in the region of £30,000 when full NAV is used. Consequently, the rate in the pound charged by local authorities will have to fall sharply in order that the total rates collected through the rating system will remain broadly the same. Effectively, the rate in the pound will be reduced sufficiently to offset the increase in rateable valuation and hence deliver a revenue neutral outcome, subject to some adjustment for inflation.

The Bill, which is primarily aimed towards modernising the valuation process, mainly retains the current effective rateable valuation base. I have already set out those types of properties which will continue to be subject to rates, that is, mainly commercial and industrial properties. I have also indicated those properties which will not be subject to rates. In addition, I have outlined the changes being made in the rates base under the Bill. I would, however, like to made some further comments in this regard.

Under the existing valuation code those harbours which have been established as commercial bodies under the Harbours Act, 1996, are deemed to be rateable. The harbours concerned are, however, appealing the rateable valuations and do not consider that they should be included in the list of rateable properties. Consequently, to dispel any doubt about this issue, the Bill confirms their rateability and removes the anomaly whereby Dublin Port is liable for rates on only 21% of its rateable valuation. Prior to the 1996 Harbours Act, only Greenore and Rosslare ports were fully rateable. The Bill will ensure that all commercial ports in the State are treated in a similar manner and, on equitable grounds, the case for their exclusion from the rates base is not sustainable. Under the Bill those harbours operated by harbour authorities, excluding those harbours still in State occupation, will also be liable to rates.

The Bill provides that the exemption status currently enjoyed by most schools be extended to those universities and other third level educational institutions not established or conducted for profit and-or State funded which are not already relieved of the obligation to pay rates. The principal beneficiaries will be Trinity College and UCD, which are currently partly rated. Private agricultural colleges may benefit in so far as they meet the exemption criteria. Other possible beneficiaries are the Royal College of Surgeons, the Royal College of Physicians and the Incorporated Society of the King's Inns. The extent to which these institutions will benefit is dependent on whether they can show they are not established or conducted for a private profit and are conducted for educational purposes.

The Bill removes the anomaly whereby mines become rateable only seven years after they have been opened and reopened mines become rateable seven years after they have been reopened. This seven year relief from rates was conceded in the 19th century when mining technology was less advanced than it is today and it might have taken several years to bring a mine into full production after it was opened. The Bill also removes the anomaly whereby the right to drill for and take away petroleum is not deemed a rateable hereditament in relation to a particular oil pool until the expiration of 20 years from the date on which petrol was first produced from that oil pool. Any mine, reopened mine or petroleum extraction operation already enjoying a relief from rates at the time the new valuation Act commences will continue to benefit from the balance of the respective relief. That is only fair.

All commercial and non-commercial State-sponsored bodies are liable for rates under the existing valuation code, with the exception of Teagasc and An Bord Pleanála. These two bodies are currently exempted on the grounds that they exist for public purposes. To have all commercial and non-commercial State-sponsored bodies treated consistently, the Bill provides for the inclusion of both bodies and other State-sponsored bodies in the rates base. As regards Teagasc, it is proposed to exclude from rates all property that is used for educational purposes and non-commercial agricultural research. Similarly, property in use by FÁS for industrial training and property in use for industrial research by Forbairt will continue to be excluded from the rates base.

All property operated by local authorities and occupied by the Central and Regional Fisheries Boards is liable for rates under existing legislation and it is not proposed to alter this position. Prior to a judgment of the Valuation Tribunal in 1989, all administrative offices of health boards were deemed to be rateable in the same manner as local authority property. The Bill returns them to that position. Some of the administrative offices of the vocational education committees are also exempt from rates on the grounds that they are used for public purposes. However, rates are collected in respect of other VEC administrative offices. The Bill contains provisions which will confirm the rateability of these administrative offices. The administrative elements of schools will be unaffected by these provisions.

The Bill also provides for the continued exemption from rates for An Taisce by providing an exemption from rates for property occupied by a body established to conserve Ireland's natural and built endowments when the property is used exclusively in a non-commercial manner to meet that objective.

Given the continuing relief being provided for farm buildings, the Bill provides for similar relief from rates to facilities used for the breeding and rearing of fish. Fish farms are currently rateable. The exemption will cover facilities directly related to the operation of the fish farm but facilities used for the processing, storage and retailing of fish products will, of course, continue to be rateable.

The Bill provides that State-occupied property will continue to be exempt from rates – that is Government offices, Garda stations, Army barracks, prisons, State-occupied harbours and canals occupied by the Minister for Arts, Heritage, Gaeltacht and the Islands. The commercial sector, in particular IBEC and the Dublin Regional Business Alliance, have made representations that State-occupied property should be made subject to rates. While having some sympathy for their viewpoint, I would point out that rates have never been levied on property occupied by the State but that a contribution in lieu of rates was paid to local authorities from the 1870s until 1987. Since 1999, the contribution has been subsumed into the rates support grant, now the local government fund.

Making State-occupied property subject to rates would have to be on the basis of clawback measures from the local government fund being put in place to compensate for the significant rates income that certain local authorities would derive from State-occupied property. It must also be recognised that the local government fund has increased considerably in recent years. Rating State-occupied property with clawback measures from the fund being put in place, would almost certainly result in no reduction in the rates paid by current ratepayers. I simply was not going to enter into this cycle. I did not see any purpose in doing so and, in the final analysis, there would not be any real benefit.

While exempting State-occupied property from rates, the Valuation Bill does, however, provide for the commissioner of valuation to value these properties in the first revaluation following enactment. This will allow for rates to be collected in respect of these properties should Government decide at a later date to pursue that course of action. The State should have a knowledge of the rateable base of all the property it owns and, thus, of what the rateable income of all its property throughout the country could be. The Bill will provide for that.

Bed & Breakfast accommodation and self-catering accommodation have not been liable to rates since the Local Government (Financial Provisions) Act, 1978, took effect. In preparing the Valuation Bill, the Government considered this issue at length but decided not to rate B&B and self-catering accommodation. While there might be merit on equity grounds in the proposals to rate B&B and self catering accommodations, it is also clear that there are currently significant practical difficulties in doing so, in particular, the absence of a compulsory national licensing or registration system for such premises.

Deputy Jackie Healy-Rae.

He never spoke to me about it, believe it or not. It is amazing.

He will later today.

No. I am stating it as a fact to the House. I have heard this said on many occasions, but I can assure the House, as somebody who has been dealing with this Bill since I entered office – I have been directly involved in this issue for some time – and he never spoke to me about it.

What is a B&B? What scale are we talking about?

It is what operates throughout the country at present, as the Deputy well knows. It concerns anybody operating a bed and breakfast business and I have not differentiated between size or scale.

If a hotel does an evening meal, is it a B&B?

Allow the Minister to continue, Deputy Creed, his time is limited.

As I have just pointed out to the Deputy, the absence of a compulsory national licensing or registration system for such premises makes it extremely difficult to act. I would like to see that matter being dealt with, but that is not in my area.

The Minister is coming into it.

The 1988 Valuation Act provided for the option of assessing public utilities within the framework of a global valuation. In essence, a global valuation involves a simultaneous nationwide valuation of a public utility's total property, as opposed to the separate valuation at different times of a public utility's individual properties. In the Bill, the global valuation provisions have been retained essentially unchanged. However, the prescribed method of valuation currently applicable to all global valuations has been removed. Public utility undertakings assessed under the global valuation provisions will be valued on the same basis as all other property, that is on the basis of NAV.

It is the Government's intention that the effect of this legislation should be broadly neutral in its impact on the Exchequer. This intention will be taken into account in the calculation of grants and payments to bodies in receipt of State grants.

It is intended that after the completion of the first national revaluation, subsequent revaluations of rating authorities will be carried out at regular intervals to ensure the valuation base is kept up to date. Accordingly, the Bill has a provision which requires the commissioner to commence a revaluation of a rating authority no earlier than five years and no later than ten years after the previous revaluation of that authority commenced. That is an important issue, so that we do not end up after 150 years having to do what we are doing now. It should be done on an ongoing basis.

The Bill repeals existing valuation legislation. Accordingly, it provides for the continued use and updating of the existing valuation lists until new valuation lists are available. In effect, the existing valuation list for a rating authority will continue to be updated by the commissioner and used for rating purposes until that rating authority has been completely revalued.

The current valuation system has a revision process, whereby ratepayers and rating authorities can apply for the revision of the valuation lists to take account of any change in circumstances of a property. Such a change in circumstances would include a change in use, an extension or contraction of a property, and any other factor that might have relevance for its rateable valuation or for its rateable status. Revision applications generally seek a revision of the rateable valuation of a property. The Bill provides that a revision process will be retained in the new valuation system. A revision process will still be necessary to take account of any change in the circumstances of an individual property that occurs between revaluations. It would obviously be unfair to a ratepayer to have to wait until a revaluation takes account of any change in the circumstances of a property, and any lower rates bill that would result from a consequently lower rateable valuation. Similarly, a rating authority should be able to charge rates on any increased value of a property and on a new property without having to wait until a revaluation.

Under the current valuation system, a ratepayer or a rating authority can appeal a determination by the Valuation Office, firstly, to the Commissioner of Valuation and, secondly, if dissatisfied with the commissioner's determination, to the Valuation Tribunal. Both of these appeal provisions are being retained, as is the option of an appeal to the High Court or Supreme Court on a point of law. However, the Bill augments the formal appeal process with an earlier phase, called the consultative phase, during which the ratepayer will be notified of the Valuation Office's proposed determination before it becomes effective for rating purposes, and will be given an opportunity to make a submission to the Valuation Office, if they so wish, about that determination. The ratepayer will have 28 days within which to make such a submission to the Valuation Office before the valuation certificate is issued and the valuation list amended or published. This is an important aspect of the Bill, putting the ratepayer back in a very strong and central position.

The time period for appeal to the commissioner against a valuation certificate issued by the Valuation Office is also being increased from the current position of 28 days to 40 days. The time limits for appeals to the Valuation Tribunal at 28 days, and to the High Court at 21 days, remain unchanged. Therefore, under the Bill the time period from when the ratepayer becomes aware that a revaluation-revision is being undertaken to the date by which he or she has to appeal to the commissioner, will be considerably increased compared with the present position.

The Bill also provides that an individual applying for a revision or appealing a Valuation Office's decision, will now apply directly to the commissioner on the matter, rather than going through the relevant local authority as a present. Appeals to the Valuation Tribunal will continue to be made directly to the tribunal.

The Bill proposes to give the Valuation Office enhanced powers to obtain information relevant to the determination of rateable valuations. In most cases, information requested by the Valuation Office is supplied voluntarily. However, in a small number of cases, the Valuation Office has difficulty obtaining relevant information. Accordingly, the Bill provides that, as a general requirement, all occupiers of rateable property will be obliged to submit to the Commissioner of Valuation, and update whenever necessary, such information as is required for the purposes of valuation. The commissioner will also be enabled to require the provision of information from an occupier about a specific property. Such information will include details concerning tenure, terms of a lease, purchase price, contract date, amounts of expenditure, rents and premiums payable, landlords' contributions, including any contribution towards fit out costs, tenants' improvements and whatever other details the commissioner specifies. Failure to comply with these obligations will be penalised by fines of up to £1,500 depending on the offence.

The Bill also retains the right of access to all property for the provision of valuation. Failure to comply with this obligation would also be penalised by a fine of up to £1,500. In circumstances where it is seeking entry on to a property, the Valuation Office will have to give three days notice before exercising its right of access, an important provision.

The Bill is the first comprehensive valuation legislation introduced since the 1850s. It is designed to improve, streamline and modernise the operation of the valuation system, to remove deficiencies that have built up over the years, to bring it more into line with the contemporary commercial environment and to make the system more transparent and equitable for the ratepayer. It will allow a revaluation of the country to take place, the first since the middle of the 19th century. Such a revaluation will allow a uniform and equitable valuation base to be established and anomalies to be removed. It will also allow a return to full net annual values. Provision is also made for regular revaluations every five to ten years to prevent the system ever becoming so out of date again. The Bill enhances the appeal process and provides the opportunity for ratepayers to be involved in the valuation process from an early stage. I stress that the Bill is not designed to increase the rates income of local authorities and, therefore, provides for a cap on the overall rates income in the year in which the revaluation takes effect. I commend the Bill to the House.

I wish to share time with Deputy Creed. I am glad of the opportunity to contribute to this Bill, which is welcome. To say it is long overdue would be an understatement given that it is replacing statutes dating back as far as 1838.

I pay tribute to the personnel in the Valuation Office. They are people of very high integrity and are very courteous in their dealings with the public and public representatives. It is probably one of the busiest public offices in the country and the volume of work it does is tremendous.

This Bill is a lost opportunity. In 1977, the rates issue became a topic of conversation and action. The abolition of domestic rates was the first step in eliminating them. It was widely welcomed because of the inequities within the system. When it came to the question of agricultural land, the rateable valuations were very much at variance with each other and there was no coherent plan or any consistency. The Supreme Court judgment of the 1980s indicated that this could not continue to be a basis on which local taxes were raised for local authorities.

Is it a realistic basis for the collection of revenue for local authorities from commercial and industrial premises? Various people, particularly small business people, have said that commercial rates are a bottomless pit to shore up the overruns of local authorities. It is a damning indictment if one considers the way in which the small business association has referred to rates.

The Minister said he has capped the rates. For the year he mentioned, at 5%, that is welcome. However, if we take this year alone, when the Minister for the Environment and Local Government said there would be a cap at 9%, most local authorities went up to the limit. Most businesses and industries are paying rates at 9%, way above the anticipated inflation rate. Although the Minister has given an undertaking to cap the rates, no long-term guarantee can be given. That is fine given the times in which we are living, because we are getting huge resources and finances from the EU, but come the day when there is a reduction in the finances available to local authorities, the focus will come back to the very lim ited number of ratepayers. Some people might say the number of ratepayers is decreasing. Although the Valuation Office originally had to assess 1.7 million households and buildings for valuation, under this Bill the number will be reduced to around 160,000. That is a huge task for any office to undertake.

There is a vagueness in the Bill. I understand the difficulties which this task will present for the people in the Valuation Office. Do we have adequate staffing and resources within the Valuation Office to carry out this revaluation? There is no indication that additional resources and personnel will be available to the office to undertake this task. In terms of the time scale, we are talking about a minimum of five years. There is no definite date by which we have to complete this. That is a very serious shortcoming in the Bill. At present we have an ongoing revaluation process, which is cumbersome. I very much welcome the elimination of the local authority and that one will go directly to the Valuation Office for revaluation. That will eliminate a time factor which existed and it is welcome in so far as it is a more direct route.

I very much welcome the idea of consultation between the ratepayer and the commissioner in the Valuation Office. However, the Bill is really nothing more than a tidying up exercise. If there was a reassessment of certain aspects of the valuation process, it would be important to state them. They are not, however, stated. We are only nibbling at the edges or tidying up irregularities and inconsistencies that have occurred and have become blatantly obvious to everyone involved in the process of valuation.

It is important to look at how valuations come about initially. It is a hit and miss operation at present. Many properties have not been revalued because they have been missed. This is an opportunity to revalue properties, which I welcome. Were it not for the planning process and planning applications at local authority level where the local rate collector or revenue collector for the local authority is able to assess a property, pinpoint reconstruction or extensions or new buildings of a commercial or industrial nature, there would be no process of ongoing revaluation unless a person come forward. Ratepayers are reluctant to come forward for revaluation because it inevitably means an increase.

Who will go out there in this day and age and self-inflict an increase in taxation? It is nothing but an increase in taxation for them. It is a double taxation and is one of a multiplicity of taxes which businesses have to pay. There is a great fear among small business people and industries regarding what is about to take place. It is inevitable there will be increases. For the life of me I cannot see how any property will be revalued downwards. That is a terrible situation facing most people today. The result of this Bill will mean additional local tax and it cannot be viewed in any other way. We are now providing the opportunity for local authorities to revalue upwards, to have a greater income and on top of that we will allow them a cap of 5 per cent and thereafter it will be at the behest of the Minister for the Environment and Local Government to cap it. Based on this year's scene we are talking of a cap of 9 per cent. Few businesses can continue. It is fine while the buoyancy of the Celtic tiger continues but what will happen when the slide comes and there is pressure? There was a process in the past where the local county manager could waive rates because certain industries or commercial enterprises were experiencing serious financial hardship and there was a threat of redundancies at a time when jobs were scarce in certain areas. Obviously, that will now be eliminated. I cannot see any provision in the Bill for a waiver but if it is there I would like to know how it will operate. Under the provisions of this Bill the ratepayer will deal directly with the Valuation Office rather than through the local authority.

The Minister referred to a list of buildings which will be derated outside the rating process. Despite the fact that he replied to Deputy Creed that he had no consultation with the Independents who shore up this Government, the reality is that the party went down the road of introducing rates on bed and breakfast accommodation and suddenly it was gone. The assurance the Minister has given today must frighten many bed and breakfast operations throughout the country. The reason I say that is that he has no clear definition of what is a bed and breakfast operation. Until he has a clear definition and follows it up by saying this cannot be done until a licensing process is put in place, there will be a real fear among bed and breakfasts operations, rural and urban, throughout the country. If one is licensed one is operating as a commercial enterprise and therefore one is liable for commercial rates in the same way as any other business. I ask the Minister to be clear and unequivocal in his commitment that bed and breakfast operations as we know them in rural Ireland, where tourism is important to support incomes and to maintain people on farms, will not have rates imposed on them. Irrespective of what pressure may come from the Deputy from Kerry and others, will the Minister yield to him as he has done in other areas such as the dual mandate? The Minister was on the point of quivering in that instant and I think he will do likewise in this instance also.

I wish to hand over to Deputy Creed. This legislation will have to be made more definite on Committee Stage. Will the whole country be revalued over a period or will it be local authority by local authority. If that is the road we are to go there will be advantages and disadvantages. There will be winners and losers and the losers will be those who will have to pay increased rates as a result of this Bill.

I heard most of the Minister's speech and I was broadly impressed with its con tents and the contents of the Bill. As my colleague, Deputy Burke, has said, basing our rateable valuation system on legislation based on the 1800s is of itself sufficient grounds to revisit this area. Broadly what is contained in the Bill is a step in the right direction.

One of the earliest political events that I can recall was the 1977 general election. I can remember it specifically in the context of a great friend of mine, now deceased, who was involved in a local GAA club, Pádraig Dervan, a native Galway man. I remember being dismayed to find in the back of his car the Fianna Fáil manifesto – he used to transport us to matches. If my memory serves me right, the slogan was "Let's get the country moving again". The broad thrust of that manifesto was the abolition of rates and car tax. It was a give away manifesto which, by and large, the people opted for in great numbers. One might ask what relevance that has to the valuation debate. Following on from that were the great tax marches of the late 1970s and the early 1980s.

At this juncture it would be wise to reflect on the narrow base for revenue raising activities. By and large, it is income tax driven and there are some associated taxes, commercial rates being one. The collection system has been narrowed very significantly. The 1977 manifesto was the trigger mechanism and the subsequent election results and the obligation to implement those promises led inevitably to the tax marches of the late 1970s and the early 1980s. If my memory serves me right, the Commission on Taxation, which Dr. Miriam Hederman-O'Brien headed, subsequently looked into all those issues. It strongly recommended that the tax base be broadened to shift the onus of responsibility from PAYE workers in general.

It is a pleasant time to revisit this debate because in the climate of a successful economy income tax rates have been falling and to an extent PAYE workers are less burdened than in the past. It is possible to revisit it now not in the sense of broadening the tax base, from the point of view of increasing the revenue we take, but so that we can further reduce the liability which the PAYE sector faces. That is a debate we should not lose sight of. The tax base is excessively narrow. Primarily it is an income tax based system. There is scope in this climate to look at further sources of revenue not to increase the take but to make it a more equitable system.

All of us are aware – and it will not be improved in the context of this Bill – there are huge residential property portfolios being held by individuals which are not liable for rates. People who had cash bought numerous houses. There are people who have ten, 15 or 20 houses rented out in the private sector but they are not registered with their local authority as landlords. Effectively, these people are non-existent in terms of their obligation to pay rates. Perhaps the Minister of State will say if they complied with the letter of the law such would not be the case, but that is the reality. There are enormous residential prop erty portfolios held by individuals who do not have rateable valuations. Wearing my local authority hat, I can say that some people feel very aggrieved at the manner in which they are treated by the Valuation Office.

Last Saturday, a man who owns a truck and has a permanent contract with Cement Roadstone visited my constituency clinic. This man has gone through the valuation process but, because he takes his truck home and parks it in a garage adjacent to his house, he was found liable for rates. The logical extension of this is that a travelling salesman who brings his car home in the evening or a hackney driver or taxi driver should have the garage adjacent to his house equally rated. This is crazy and there are huge anomalies in the rateable valuation system which need to be addressed. Broadening the tax base is an associated matter which we should not lose sight of and such a debate would provide an opportunity to raise that issue.

I concur with the views expressed by Deputy Healy-Rae in relation to exempting bed and breakfast establishments from rates. However, there is a definition issue here. Deputy Healy-Rae is broadly campaigning on the rural based, by and large non-registered residential properties where one or two rooms are used for that purpose. However, there are purpose-built 20 and 30 bedroom facilities trading as B&Bs but which are not liable for rates. There needs to be more clarity in relation to what is or is not exempt, otherwise the commercial viability of hotel properties which are liable for rates will be undermined. Unfair competition between B&Bs and hotels is a glaring manifestation in that context but small garages, panel beaters and other businesses which are not rated are present put their competitors at an unfair disadvantage. Perhaps there should be some type of amnesty for declaring commercial operations and, rather than just looking at the tax returns of businesses, their rateable valuations and so on should be looked at. This would allow for a more level playing pitch.

In relation to the valuation process over five years, it would be more equitable if the findings of the revaluation process were not implemented until revaluation is completed nationally. If the implementation of the process is carried out on a piecemeal basis, it will discriminate unfairly against others. I welcome the Bill and hope the Minister of State will take on board my points on Committee Stage.

I acknowledge that I had a briefing from the Minister of State's officials, for which I am grateful. This was very useful in going through what is, by and large, a technical Bill. I intend to be very concise in what I have to say.

The Bill is welcome. We have long since needed a complete review of valuations nation wide and I am pleased this will take place over the next few years. I am particularly pleased that under the provisions in the Bill it will be obligatory to carry out a further review within a five to ten year period. This will ensure we will not again get ourselves into the current position in the near future or at any stage.

I will make a few net political points, one of which relates to State property. In a sense I am wearing two hats here because I am a member of Dublin Corporation in whose area a great deal of State property is located. Clearly, if the Government's programme of decentralisation continues as is intended, this will also apply to many other local authorities. There is no doubt that Dublin Corporation wants to have State property rated simply in order to increase the rate base and the income flow to the corporation. The Minister of State pointed out that he believes it would be necessary to claw it back through the local government fund. That would be a political decision. However, it would be possible to make a different political decision. I urge him to do this because, given the way in which it currently operates, Dublin Corporation, which has a budget this year of almost £4 million, effectively has no discretion as to how it raises the money. That is a crazy situation. If the biggest local authority in terms of the rate base and the amount of money it spends has no discretion, it makes a nonsense of any notion of local government autonomy in terms of revenue-raising and how the money is spent.

There is a problem about rates as such in so far as it is not terribly clear what exactly this means. It is a charge for services or is it a tax? In truth, it is both. This leads to other difficulties when assessing for rates purposes sporting clubs, community centres, community facilities and child care facilities. While some facilities clearly operate for profit and others are commercial operations in that sense of the word, others are a much greyer area. I am referring to community facilities or community centres where money is raised to keep that facility in operation within the community and is of clear net benefit to a community. For example, in relation to sports clubs, sports fields are not rated but other sports facilities, including stands, dressing rooms and club facilities are. In many cases, it is a considerable burden on clubs to pay the rates. Paradoxically, in some cases, they receive grants from Government, the National Lottery or the local authorities which, in turn, partly go to pay the rates, which is one of their significant impositions.

Deputy Burke made the point earlier that it is important that the Valuation Office has the resources to carry out this ongoing review, not just the review that will immediately follow the passage of the Bill, but the review that will become obligatory in the future. Perhaps the Minister of State will address this issue when responding.

I apologise for making this point as a Dubliner but I think it also applies to the Minister of State's city, Waterford. This relates to the assessment of needs and the way in which the local government fund has operated to the detriment of urban authorities. The way in which the assessment is made and the criteria for deciding the payments made under the local government fund to local authorities has militated against the urban authorities. In the short time since the fund came into operation, none of them managed to get the sort of top-up facility which has been made available to other county councils throughout the country.

I must be blunt and say that my party wishes to facilitate the rest of the business of the House today, particularly the Local Government Bill. With due deference to the Minister and to the importance of the Bill and his officials, I will retain the remainder of what I have to say until Committee Stage.

I am pleased to speak on the Valuation Bill, 2000 which has been introduced by the Minister of State, Deputy Cullen. The Bill has been in the pipeline for many years and for good reason. The rateable system has been in operation for hundreds of years and it is important to ensure the integrity of the system. Given that many changes have been introduced by various Governments and courts over the years, it is important that the integrity of the system is updated so that we can all stand over it.

The question is often asked as to what are rates. Is it a charge for services provided by local authorities or is it a tax? I believe rates are essentially a property tax. There is nothing wrong with that because this has been the case from time immemorial. The number of properties subject to this tax has decreased dramatically in recent years for a variety of reasons. It is a tax payable by all property holders in a local authority area and goes towards financing local authorities. This Bill is not about increasing the rates base for any local authority or the rates burden on the business and commercial community. It is to ensure greater equity and that the rates base in a county is more evenly spread, based on the valuations of the businesses in the area. There will be greater transparency regarding the way in which the new mechanisms will work. It must be reiterated that this is not a trick to try to get more money from existing ratepayers. As a member of Laois County Council for the past year and a half, I am familiar with proposing and seconding the estimates on an annual basis. The increase in rates is always a topic for discussion.

In 1996 the Department of the Environment issued a major report on the financing of local government in Ireland. It was produced by KPMG in association with Fitzpatrick Associates, economic consultants, and Murphy, Ryan & Associates Limited. It is a substantial document covering many activities in local government. There is much in the report about the rates base and the importance of rates to local authorities. It is important to stress that this has diminished in both real and proportional terms in the funding of local authorities. In 1938, the rates payable in local authorities contributed 50% to the total cost of running local authorities. In 1948, the figure was reduced to 41%, in 1958 it was reduced to 40%, in 1968 it was 32%, in 1970 it was 32% and in 1983 it was 12%, thanks to the policy of Fianna Fáil when it abolished the need for householders to pay rates. That impacted on local authorities but the balance of the money was made up by the Department of the Environment through the rates support grant and there was no loss of funding. In 1995, rates as a percentage of total local government expenditure was 26%. This was probably due to increased business activity and revaluations. The percentage of rates collected in Laois has increased.

There is a matter which I have discussed with the departmental officials who have been very helpful to me. It concerns not only Laois but every other local authority. Laois County Council will have £3,342,607 in rates in the current year which represents 13% of the council's total income for the year but it is not in line with the national average which is much higher. Laois, not having a high industrial base and having many Government offices, prisons, hospitals and other bodies that do not pay rates directly to the local authority, gets less in rates than most other authorities. Last year Laois County Council increased the rates that will be payable to the local authority by £383,000. That was made up of two elements, a 9% increase in the rate in the pound – the maximum permitted by the Department – which yielded £266,000 which was 70% of the increase and an increase in the net effective valuation in County Laois from £74,585 in 2000 to £77,305 in 2001. That was due to revaluations and new businesses getting off the ground resulting in an increase of 4% in the net effective valuation, and that translated into an increase of £117,000 additional funding for Laois County Council.

Of the increase in rates payable in our county in 2001 as against the year 2000, 70% was directly attributable to the 9% increase permitted by the Department but 30% was due to buoyancy. It is important that when we have a buoyant economy and there is a normal increase in the net effective valuation in a county that the county continues to get the benefit of that. In the transition arrangements that will come into place before the new measures are introduced, it is important that no county is left short. Local authorities should look at their valuations between now and when the legislation comes into effect. They will have a number of years in which to ensure that when the uniform system of rates is introduced in any local authority it will be on a proper basis. It has been said that in year one of the transition period the only increase that will be allowed in the rates in the county in that year, according to the legislation, will be in line with inflation. That would eliminate a buoyancy bonus, so to speak, in that year. I know it is only for one year but it would be at that lower base figure forever thereafter and only the inflation or other increases that would occur in the normal course of events would apply. It is essential for county managers to ensure their valuations are in order prior to their county being involved in this new valuation procedure. If additional finance is needed to ensure these valuations are taken up it must be provided by Government, otherwise local authorities will be penalised by not allowing them to have the correct valuation.

Rates are a property tax. Practically all properties are included. As a result of various court cases over the years, agricultural rates have been struck down as they were unfair. We must ensure that does not happen in the case of the commercial and industrial rates base and that we have proper valuation legislation in place. In the 1997 general election manifesto, Fianna Fáil promised to abolish domestic rates on all households. That took many ratepayers out of the net. The funding that would have been lost to the local authorities was made up in full by the Department. The report produced by KPMG made the point that domestic rates are still on the valuation list. The only issue is they are not paid by the domestic householder but directly by central Government to the local authorities. That is a subtle point but it is one made in the report.

Certain properties are exempted, such as State offices and so on. Perhaps the Minister will clarify the position regarding community facilities, whether it be the local GAA or soccer pitch, dressing rooms, community halls and so on. I know that water rates are levied on some community halls and that some of them have a waiver. Will the Minister clarify if rates are payable on community halls and, if so, have local authorities the facility to waive them?

We say that the rates base is, in effect, the commercial and industrial base but that is not quite so. Dressing rooms at GAA pitches and such like are included under the rates base although they are not commercial activities. Most of the constituency offices based in Deputies' constituencies receive rates demand notes, which are paid like all others, although we are not in business in the commercial sector. It is clear from this that a number of buildings are rightly caught in the rates net. It is not confined to organisations involved in commercial and industrial activities.

The question of the net annual valuation is a well established concept in the court. It will be the basis of valuations from here on. It amounts to 5% of the aggregate replacement cost of the property less the appropriate amount of depreciation. The appropriation valuation for plant, machinery, pipe lines, power lines and other items is also included. It is a realistic, simple approach and, most importantly, it allows for the fact that the replacement or reinstatement cost of a building in, say, Dublin city centre is far higher than in the middle of County Laois. It is good that a uniform valuation is not used because in the absence of this construction and replacement, costs in rural areas, which are cheaper than in urban areas, would be allocated a higher notional valuation.

It is important to ensure there is uniformity within each local authority. It will ensure nobody can complain they are paying an unfair burden in term of rates by comparison with another business on the street or in another town. This concept will remove anomalies from the system and is to be welcomed on that basis. It is a new concept, but when it become fully operational within one, two or three years of the enactment of this legislation people will see the benefit of it.

Some of the exemptions from rates have specific relevance to different parts of the country. It is important to recognise that at present property used for the following purposes are not included in the rates base: domestic, agricultural, State occupied, land development, forestry, horticulture and sport; non-commercial and State funded hospitals and other treatment centres; non-commercial and State funded educational undertakings, such as the national vocational and secondary schools; places of worship; public parks, libraries, national monuments and properties used for the advancement of the pure sciences and the fine arts; charitable organisations that are used in a non-commercial manner for charitable purposes; and property occupied by An Taisce.

The concentration of Government buildings varies from county to county. County Laois is fortunate in having a high concentration of such buildings, be it hospitals or regional offices for the Department of Agriculture, Food and Rural Development. In addition, between the old prison in Portlaoise and the new one recently opened, the biggest prison complex in the country is located in Portlaoise. This places an enormous strain on the local authority in terms of providing water, sewerage, roads and other infrastructure. The Department of Justice, Equality and Law Reform does not provide commensurate payments in respect of rates. While there are major benefits to the county in having such a major facility, in terms of employment and to the local economy, the lack of rates payments on the buildings must be taken into account at local level.

The legislation provides that in the year it is introduced there will be no increase in the rates set by any local authority above the rate of inflation. There will have to be transitional arrangements between now and then to ensure that each local authority has a proper valuation of its property portfolio, otherwise they will lose out on the buoyancy effect that tends to arise in a booming economy. There is also a welcome change to the approach to valuation. The Valuation Office will issue a notice of its intention to value an office or a property and the property owner will have 28 days to make a submission, which must be taken into account. I understand this procedure is identical to that in operation at the Environmental Protection Agency. It issues a notification stating its intention to issue a determination in 28 days and any submission it receives in the interim must be taken into account. That is a welcome development as it may reduce the number of appeals. If people are unhappy they can continue to appeal to the Com missioner of Valuation, thence to the Valuation Tribunal and if a point of law arises very citizen has the right to appeal to the courts. There have been many High Court cases on valuations and there was much case law on which to draw when finalising this legislation.

I understand the number of appeals to the Valuation Tribunal have decreased recently, which is to be welcomed. Perhaps it is because in the booming economy businesses may not be so preoccupied with the increases or revaluations of the rates in respect of their properties. In recessionary times people may be much more watchful of increases in the rateable valuation and may be more inclined to appeal.

There are many quarries and mines in Laoighis-Offaly, be they sand pits, gravel pits, various types of stone quarries and so on. This is an extractive industry, but such enterprises have been too heavily penalised over many years. I know there have been cases in the courts, and there are clear formulae and that there have been cases in London, in the House of Lords, and everywhere on this issue. However, that industry has been allocated an unfair burden of the rates bill wherever it operates.

The rates payable on new toll roads, provided for under the national development plan, will be contentious. One will be located in County Laois, at the N7 and N8 junction south of Portlaoise. The payment of rates on that road will make land acquisitions from farmers even more difficult because they will not sell for normal road building purposes, but to the State, where the new roads will be a commercial activity and where people will derive incomes from the tolls charged. Rates will be payable, as per the precedent established in the courts regarding toll bridges.

Is that Government policy?

It is my opinion, which I have shared with the relevant Ministers and the National Roads Authorities. I will continue to express this view on behalf of my constituents. The land is not being acquired for normal road building purposes but for commercial activities. In view of this, those selling the land should get a commercial price. Some 200 farmers in County Laois will be directly affected by the N7 and N8 roadways. If the Waterford route is constructed it will be located on the west side of County Carlow and will pass through County Laois, which will be the county most heavily affected by the new national primary routes network.

No rates are payable by public hospitals, despite the fact that private consultants conduct much business in them. If they operated in private hospitals they would have to pay rates. I do not suggest public hospitals should pay rates, but there should be a mechanism to ensure that the State does not subvent the income of hospital consultants who use public hospitals for their private work. I commend the Bill to the House.

I will reserve my comments for Committee Stage.

I do not pretend to understand all the technical nuances of the Bill, nevertheless, I welcome it because, as the Minister of State said, a key motivation for introducing it is to allow for a revaluation of commercial and industrial properties in all rating authorities over a period of years.

I am somewhat concerned by the Minister's statement that the increase in local authority rates income through revaluation is not the purpose of the new legislation. He stated that in order to put this beyond doubt, provision is made for the capping of the increase in the overall rates income of a rating authority area in the year in which the first revaluation is issued for rating purposes. I note that revaluation of all rateable property throughout the country is to be carried out on a rolling basis, in other words, the revaluation of individual rating authorities will be carried out in a planned, sequential manner over a five year period and will be carried out at regular intervals thereafter.

The exemptions from rates, including those which apply to State occupied property, are of concern. Dublin Corporation, in adopting its most recent estimate, established a value for money committee to investigate means through which additional income could be generated. I will advert to a number of these later.

The Bill's objectives are clear. We are revising legislation introduced in the 19th century in order to facilitate the revaluation of all rateable property in the country, make the valuation system more transparent to ratepayers and rating authorities and clearly define categories of property as rateable and non-rateable. A number of the Bill's 13 Parts and six Schedules are worth noting. Part 4 provides for a definition of "relevant property" to be valued under this Act and outlines the categories of property which will and will not be rateable. Part 7 provides for an extensive appeals process. Part 11 provides for and defines the net added value of valuation and Part 12 provides that the revaluation process will result in overall rates increasing by a rate not greater than a specific percentage provided for inflation as measured by the consumer price index. Schedule 3 lists categories of relevant property to be subject to rates and Schedule 4 lists categories which are not to be rated.

I would ask the Minister to take on board the concerns of members of Dublin Corporation in regard to the Bill. The Bill will enable the Valuation Office to revalue all property in the State. It is proposed to carry out this revaluation on a phased basis and to implement the new valuations on a rolling basis, area by area. This process may create an imbalance between different areas of the country. If possible, revaluations should be carried out at the same time throughout the country in order to avoid possible distortions arising between different areas. I am sure such a pro posal will drive civil servants and technical staff wild but, with access to modern information technology, it should at least be considered. Rating authorities would need to receive the final valuation list in August-September in order to achieve greater forward planning in the preparation of their annual estimates of expenses. It would be beneficial if valuation list publication dates were agreed between the Commissioner of Valuation and individual rating authorities. Perhaps the Minister would consider including a provision to this effect in the Bill.

The main changes proposed in the rates base include a proposal to include the rating of administrative offices of health boards and Teagasc. The rateability of VEC offices and non-commercial State-sponsored bodies and agencies which do not pay rates at present, such as An Bord Pleanála, is also confirmed in the Bill.

Schedule 3 seeks to retain the exemption of State property from rates. There is an extensive portfolio of State property within Dublin Corporation's administrative area. The Bill proposes to value such property but to exempt it from rates. The request to the Minister to amend this provision is justifiable. Dublin Corporation is requesting rates to be levied on all State property. It is necessary to broaden the rates base as much as possible and this could be achieved by making State property liable to rates. The request will not come as any great surprise to the Minister or his officials. Such a change would probably be revenue neutral for local authorities as the State would probably insist on a commensurate adjustment in grant allocations from the local government fund. We would argue that the State is no longer exempted from the planning process and that Departments should prepare administrative budgets which reflect the full extent of administrative costs, one of which would be the cost of occupying property. Due to the State's extensive property portfolio within the corporation area, we are asking that rates be levied on such property.

Section 3 states that, for the purpose of the Act, a property which provides lodgings should not, by this fact alone, be precluded from being defined as a domestic premises. This means that accommodation not registered under the Tourist Traffic Acts, namely, certain bed and breakfast establishments, will continue to be exempted from rates. The Minister should consider amending the Bill to make bed and breakfast establishments with six or more rooms available for guests liable for rates on that portion of the premises. This would not adversely affect smaller establishments. There is a number of very large bed and breakfast establishments which differ entirely to the type of establishments in the more traditional tourist areas throughout the country, such as the west, south-west and north-west. We believe there is very little difference between the guesthouse accommodation available in Dublin and that provided by hotels in the city.

Is the Deputy proposing to rate such establishments once and for all?

We are proposing an amendment which would exempt smaller operators such as those in Wicklow, Kerry and Donegal—

How small is small?

Deputy Carey, without interruption.

The other type of accommodation to which we wish to draw attention is investment property, such as apart-hotels, which clearly falls into the business category. The definition of domestic property should identify such property as distinct from new businesses such as apart-hotels which are not rated but are in competition with the hotel and guesthouse sector. If the Minister were to take on board our suggestions, the rate base of the Dublin borough would be much broader and a good deal more equitable than at present.

The extension of the rates base would also generate significant new revenue for the city. We are therefore talking about rates on apart-hotels, Government property and some guesthouses and bed and breakfast establishments.

On a point of order, would it be possible for the Minister to indicate if this is totally at variance with the undertaking given to the House already today?

Acting Chairman

Deputy, that is not a point of order. The Minister will have an opportunity at the end of the debate to reply to all the points made.

There is a lot of clarification needed.

Why is the Deputy not outside Deputy Noonan's room?

Acting Chairman

If the Deputy wants to have a private conversation, he should have it outside this Chamber. Deputy Carey is in possession.

The whole purpose of a Second Stage debate is that we would put forward constructive proposals, some of which may be at variance with some of the provisions contained in the Minister's proposed legislation. Nonetheless it is worth taking these on board, otherwise we will have a continuation of what I have experienced much of since I came into this Chamber, namely, bland exchanges of ideas leading nowhere. I know the Minister will reflect on these points and he may well find a way of modifying them.

In general, I am supportive of the objectives of the Bill. Making proposals for amendments in respect of State property and bed and breakfast accommodation is in accordance with the sugges tions we submitted to the Minister for the Environment and Local Government during our annual Estimates process over several years. Each year, when Ministers of various political hues have been in power, there is very little that is new forthcoming but as the revaluation process has not been visited since the 19th century, some of us were not around to participate in previous discussions on the matter.

This is a complex Bill which will require a great deal of teasing out but it has significant implications for the rate base of local authorities. It applies to other institutions as well but they are the ones I wanted to address in my brief contribution.

This is a welcome Bill in the sense that any system which is based on 150 year old rules obviously needs to be updated. Modern day methods and efficiencies need to be backed up by modern laws and systems. In regard to some of the Acts that are repealed in this legislation, the earliest dates back to 1834 or 1836 and, thankfully, much has changed in the country since then. It is amazing that it has taken us so long to get into modern mode on this particular one.

Members will make comments on aspects of the Bill with which they agree or disagree but nobody on any side of the House can argue with the fact that the Minister is updating a fairly archaic system. The Valuation Office, to a large extent, has got its act together over the past five or six years and the long delays that were previously experienced in having issues dealt with appear to be a thing of the past. It is timely now that clearer definitions, guidelines and structures be put in place because they will benefit both the public and particularly the local authorities carrying out business on our behalf.

All of us who are public representatives, particularly those with a dual mandate, have had the frustrating experience of making inquiries on what we think is a logical approach to a valuation related issue or a taxation issue only to come up against some impediment which was designed 150 years ago. We had to change that system and I compliment the Minister in that regard.

It is correct to say that there will be at least one element of the Bill which will lead to greater centralisation. That will be proposed in the new structures. The individual or indeed the company being rated will now be able to make representations directly to a valuation manager at the Valuation Office rather than at the local rate collector's office as heretofore. The benefits of that change will be equality of treatment for all, regardless of geographical locations, and it should in this instance at least outweigh the Government's decision to decentralise all Government functions.

One can get into a philosophical argument about the fact that everything should be decentralised but that can lead to inequities in its own way. I have heard people from different parts of the country argue that they were being treated in a different fashion to people from other areas. This is one time I would agree with centralisation because it will ensure a level playing pitch and fair treatment for everybody involved. It will remove that argument at least.

The public, on hearing about the Bill, will be forgiven for thinking that it is purely a technical Bill which will not have any effect on their affairs or their normal routine but that is not true. Regardless of whether they have property of their own, this legislation will affect them because it is the basis for collecting much of the funds required to carry out developments and for the supply and maintenance of local authorities. It will have the effect, as has been referred to by previous speakers and my colleague, Deputy Carey, in particular who has an interest in this area, of broadening the rate base and getting properly funded local government. Part of that should be based on the premise that everybody pays their fair share.

In the past certain parties objected to the principle of individual households paying service charges and in 1997 we made a decision, rightly or wrongly, to abolish domestic rates. That led to a shortfall in funding for local authorities which, in turn, has led to a situation where services that should be provided in an area are not being provided because we are constantly balancing the books. If we get away from those philosophical arguments, however, and look at the broader context, we would all accept that to have everybody contributing is a fair way to move forward. We accept that it will be for the betterment of local government to adopt and implement this kind of approach.

As a totally committed local authority activist – I have 26 years service and had the privilege of leading my city as Lord Mayor – I have consistently argued that we need to broaden the rate base, make everybody contribute and ensure that the system is clear, that everybody understands it and that they are getting a fair deal. People would be willing to accept that if they see it done that way.

Dublin has been fairly unique over the past few years in that it applied a different methodology to the majority of the country. It decided it did not need a local contribution and managed to work without it. That is changing, however, and I read that two or three of the new councils are accepting that there is a need for a local contribution as well as the commercial rate, and that is probably the way it should be. Any moves like that should be fairly balanced. In Cork Corporation and Cork County Council there is a waiver system in place to give people in the domestic situation an even chance.

On the commercial rates, many people felt they were impediments to development, that the system was unfair and rigid with total inflexibility. That was the law, whether it dated back to Griffith's law or some other legislation. The Minister is now updating and changing that by bringing it into the modern era, and should be compli mented for doing so. The rate base is the most crucial factor in the provision and administration of local government. People pay rates to help create the infrastructure and facilities in towns, cities and villages. Such places would not survive without such funding. There are conflicts and arguments in areas based on decisions by local representatives and the fact that differences in rates provide an incentive for people to locate businesses in particular areas. I am sure these points can be teased out and that a fair solution will be arrived at.

It is important that everybody contributes a fair amount, that the system is seen to be fair and that people understand it and have proper redress when they feel they are wrongly treated. It is also important that businesses are treated alike, which has not been the case in the past when there have been crazy situations. For example, where there is a building in the middle of a city or town that has not been used for a few years a young person might decide to set up in business, revitalise the building and provide employment for himself or herself and perhaps a few others. When all the plans are put in place, the local rating officer descends on that person to say he or she owes £30,000 or £40,000 before starting business. On making inquiries about the matter he or she is told this is recorded in the valuation book in Dublin and that it cannot be waived. In effect, that person is told he or she cannot set up in business, give employment or brighten up the building which has been idle for many years. That is ludicrous and crazy and I hope it will be addressed. Appeals and other systems are being put in place, but I hope that situation in particular will change. I am not asking for an automatic wiping out of previous rates, but I ask for some flexibility so that reviews can be done on a case by case basis so rating officers are not hide bound by a law promulgated in 1836.

It is important to state the Bill is not anti-business or designed to saddle any particular sector of business. The Government has built up an excellent record in that regard and is very much pro-business. The cut in corporation tax and the general low tax environment has created a situation where the largest section in almost any newspaper is advertisements for job vacancies, which is a huge change. This approach of a low tax environment, whether it applies to employers, employees or business, has been successful and is working, and I would like to see it continued.

It is difficult to credit that the Griffith Poor Law valuation of 1838 was still being used as the basis for deciding eligibility for small farmers' assistants in the 1960s, 1970s and 1980s. It was challenged in the early 1980s and was found to be unconstitutional. I recall the hub-bub at the time. Though I cannot recall the exact ruling, I presume the timeframe of the legislation was a major factor in the decision made. It sounds ludicrous for the State to be working on a daily basis using parameters and systems dating back 160 years. It is important that we move into the modern era and do things in a modern way.

We will be asked what we are doing about A, B or C, and bed and breakfasts, a topical subject, have been mentioned. Like most other sectors, there is a big divide in that sector between a person with a traditional B&B in a housing estate who lets out one, two or three bedrooms and runs it as a part-time business – I do not know how much profit they make – and people who own the buildings we see, particularly in rural areas and county towns, which in any international description, particularly by the French, would be described as family hotels. Many of them have 20 rooms to let, and are hotels to all intents and purposes, but they put up B&B signs. Whatever about the pros and cons, it is necessary to examine this and come up with solutions. The Government and the Minister for Finance have proved in the past couple of months that they are not anxious to simply gather money from all sources. A provision in the budget allows people to rent out accommodation, tax free, which proves the Minister is not there merely to rake in cash from all possible sources. We want to be fair in our approach and as rational as possible. However, a review should apply to people who build a small hotel and call it a guesthouse. I am sure people will argue for and against this.

I welcome in particular specific parts of the Bill. Section 5 deals with the right of appeal. Rightly or wrongly there was always a feeling that it was a personalised approach by local rate collectors which decided how much people would pay or whether they got a waiver or write-off. I am glad that in future appeals will be made to a valuation manager and that he or she will be charged with the responsibility of overseeing the valuation process. If people wish to make an argument they will not have to make it to an individual who may be well known to them and whom they feel may be making a personal call or judgment. Many rate collectors have been almost described as vampires in that their job is to argue, fight and bring in the maximum percentage possible of their rate.

I pay tribute to Ms Kathleen Lynch, the rate collector in Cork City. I do not know how much her role will change under this Bill. She has certainly educated most of the local authority members about the process, the pros and cons, the difficulties and how it works. She has been fair in her approach and has not simply blamed the Valuation Office in Dublin for all the negative things. She has explained her methodology and approach, and the percentage returns are among the highest because of her efficiency. In the process she has probably made a few enemies as she has to make a call on rates due.

I am glad section 5 will provide for an appeal to a valuation manager. In the past there was a lengthy delay, but under section 7 the right of appeal is available to the High Court and the Supreme Court on the points of law and must be done within 21 days of the tribunal's decision. I presume this has been worked out and that there will be a facility for access to the courts. Is it just that under section 7 the application must be made for the appeal within the 21 days? It is also important that the tribunal must state and sign a case within three months.

In the past there was a feeling that large bodies move slowly. People trying to conduct business and to work were at a disadvantage. There have been radical changes in that regard and people have come up to speed and got their house in order. It is good, however, that these few changes are made.

Public bodies are required to supply information to the commissioner if they believe such information would lead to an amendment of a valuation list in respect of a particular property. Though I do not worry about that I want to draw attention to it. I agree with the notion that the information is supplied – that is under Part 8.

I agree with the notion that that Part is included and that the information is supplied but the changes that lead to the amendment of the valuation list concern me. North Main Street is the old historic spine of the city and we are now revitalising it. When I met many of the shop owners there five or six years ago and tried to encourage them to make changes, they explained that if, for example, they painted the front of a building or put in a new window they would have a revaluation within a month and their rates would increase. They would not have increased their turnover or their number of clients, but their valuation would automatically be increased. They were incorrect in saying their rates would be automatically increased but a case would be made and either the local authority or the Valuation Office would descend upon them and amend it.

I ask the Minister to try to ensure that someplace in the Bill there will be a provision that the simple refurbishing of the front of premises will not lead to revaluation. The shop or premises may look brighter and better and so on but it does not mean that there will be extra business or increased turnover. Officials may be taking note of this and I ask that it be built into the system that a simple refurbishment of a shop would not lead to an automatic or immediate revaluation as, in the past, such activity has led to an amount of dereliction and a number of run-down areas.

I welcome the Bill. It can only improve the situation. To the people speaking against it, it is possible that we might agree issues raised and I hope any amendments introduced will give us a better outlook than we have had for quite some time.

Ba mhaith liomsa cúpla tuairim a chur os comhair na Dála freisin i dtaobh an Bhille thábhachtach seo, go háirithe toisc go bhfuilim mar bhall de Chomhairle Bhaile Átha Cliath agus, toisc na deacrachtaí a bhí ag an gcomhairle sin le déanaí, tá sé oiriúnach cúpla tuairim a chur os comhair na Dála dá bharr sin.

It is a timely Second Stage debate on this Valuation Bill for those of us who are members of this House but who are also members of local authorities. I am member of Dublin City Council and it is particularly timely, therefore, because it was only in recent months that Dublin City Council faced abolition by the present Government and was threatened with abolition by the Minister for the Environment and Local Government, Deputy Dempsey, and his colleagues in Government due to the difficulties Dublin City Council was experiencing trying to meet the estimates required to provide services and run the business of the city.

At that time there was a great deal of debate about rates and who was paying them, who should pay them and so forth, as, at a time of great affluence and given that Dublin City Council represents an area of Dublin city which contains the greatest single concentration of commercial and State properties in the State, it seemed incredible that we could not raise sufficient funding in the normal way to run the city.

Although we examined this in great detail over many meetings, it transpired that we could not do this under the way the system works at present. The result was that a slim majority of the city council imposed what many of us regard as an additional tax on the PAYE sector in the city to pay for those services. To take one incredible example in that context, and many examples were put forward, given the proliferation of what we call multiple-occupancy dwellings, owned by private interests and private landlords – in many cases individuals or companies would own many properties – making vast amounts of money. They are running businesses and using properties for commercial purposes, i.e., making money from tenants, many of whom are unfortunate people dependent on health board subsidies. Ultimately these landlords would be making vast amounts of money from the taxpayer and yet would not pay rates.

Many fellow members of the city council were not aware of that until we had this debate; they should have been but were not, and they found it extraordinary. I find it incredible given the tens of millions of pounds these people make.

These people, particularly in Dublin city, are in a position to exploit the housing crisis to an extraordinary degree and enrich themselves in the process. Moreover, ironically these landlords were making vast amounts of money but were not paying their rates and, as a result, the taxpayer was being forced to provide an additional subsidy by way of service charges to meet the requirements of the estimates of Dublin Corporation and provide for the running of the city. On one hand the PAYE sector is doubly taxed, yet again, and on the other hand people enrich themselves to extraordinary levels and do not pay rates.

People were buying properties and putting them to commercial use but the properties, due to the way the system works, were treated as residential and therefore exempt from rates.

Does any Member of this House believe that that is fair, just or right? I do not and I would hope that the Government will take on board the suggestion that that should no longer be the case and that landlords, be they individuals or companies, should in future be obliged to pay rates on such properties. If that was the case, there is no doubt, given the proliferation of landlord owned properties in Dublin city and the vast amounts of money being made, that service charges or additional taxation would not have been enforced on the PAYE sector in Dublin city.

Deputies have referred to some of the other areas where rates are not paid, for example, bed and breakfast accommodation. In addition to the traditional bed and breakfast accommodation, there is a new range of different types of such accommodation, some of which are exploiting the housing crisis in the city. Despite the commercial use of property, none of these pays rates. This is not acceptable at a time when people who are less well off are obliged to pay additional taxation to provide for services from which the people who own these establishments benefit. A more recent development is the apart-hotels, the exclusive apartment developments which are rented for astronomical figures to executives and rich individuals visiting the city. Vast amounts of money are made, yet nothing is paid by way of rates.

There is also what many of us regarded as the ludicrous situation where the Government did not pay rates for State buildings in Dublin city at today's valuation. Assessments were made of the amount of money which would have accrued to Dublin Corporation if the State had paid rates for those buildings at today's valuation. The amount happened, by coincidence, to correspond almost precisely with the £14 million required for the running of the waste management services. We are told by a corporation official and the city manager that the money for these services will be raised by the imposition of service charges in the city. The Government threatened the city council with abolition, thereby getting rid of the democratically elected representatives of the city, because it could not find ways to meet the requirements of the estimates. Some of us thought this was amusing because if the Government had met its responsibilities in relation to State properties in Dublin city the city council would have had more than sufficient funding to provide for the needs of the capital city.

It was not only the members of the city council who had come to the realisation that there was much inequality in the payment of rates in the city. At the time this debate was taking place the city centre business association had, by coincidence, also put together a document which, if I remember correctly, drew attention to the fact that rates were not paid for something in the region of 30% of the non-residential building in Dublin city. This seems to be an extraordinary number of buildings. The association felt aggrieved that the State was not meeting its responsibilities. Far be it from me to argue on behalf of the business interests of Dublin city, but their argument was that they were paying the vast bulk of rates while the State was failing to meeting its obligation. This was a reasonable case for them to make.

I had discussions with some of the association's members. I put it to them that it was not only the State which was not meeting its responsibilities and referred to the multi-occupancy dwellings which are a source of great wealth for the people who own them. These dwellings are a means of exploiting the taxpayer, who subsidises the rent in many of them. Despite the wealth they make from the rent, the landlords fail to keep the dwellings in a proper condition. In many parts of my constituency entire streets have been ghettoised as a result of their total irresponsibility and absolute greed, which is their sole motivation in buying these properties. I emphasise that point because if there is one anomaly which needs to be addressed, apart from the State not meeting its dues, it is the practice whereby landlords use for commercial purposes properties which are treated as residential and are exempt from the payment of rates.

I hope the views expressed Deputies will be taken on board. Opposition Deputies should not have to fight for their inclusion in the Bill by way of amendment. Rather the Government should include them by way of amendment. There is no reason this should not happen. If there is clear inequity involved in these issues they should be addressed. This will make for a much fairer and more equitable system. I can only speak from my experience as a member of Dublin City Council and Dublin Corporation, but I have no doubt the same holds for local authorities in other areas. The system as it pertains will be divisive because people feel that a relatively small elite in this city makes huge wealth and does not give anything back. This élite utilises and exploits the services of the city and is assisted in amassing wealth by the fact that it does not have to pay its fair share. This Bill provides the opportunity to address important issues such as those I suggested.

I largely agree with the sentiments expressed by Deputy Gregory. It is good that we are introducing this Bill which updates legislation which goes back 150 or more years. All legislation needs to be streamlined. There has been talk of this legislation for a long time. Interdepartmental studies and so on have been carried out but I am glad the Bill has finally come before the House.

Over many years I have been involved in different discussions regarding bed and breakfast accommodation. I am not referring to the current Minister of State, but the relevant Minister has often been from a rural constituency. However, Deputy Cullen comes from a city. When one talks about bed and breakfast accommodation the Minister or the Department always seem to think in terms of Mrs. Murphy on the Dublin Road who has two or three rooms and who takes in a few lodgers on a couple of weekends in July and August. No matter who is in Government, this view always seems to set the tone and standard for the debate and succeeds in getting people to back off.

The definition of what constitutes bed and breakfast accommodation must be tackled. I agree with Deputy Gregory's comments and all Members, particularly those from Dublin, would say the same. The profile of residential accommodation has changed significantly. It must be possible to define bed and breakfast accommodation. One could do so on the basis of Deputy Pat Carey's suggestion distinguishing premises with more than five or six rooms or one could do so on the basis of occupancy levels.

Someone in the west may have five rooms which he or she lets out for a couple of weekends in the summer. Alternatively, someone in Dublin may also have five rooms but may let them 52 weeks of the year. The situation regarding bed and breakfast accommodation has changed and that is before one addresses apart-hotels, commercial outlets and the large commercial operations referred to by Deputy Gregory. We must tackle this problem and it is illogical that rates are not charged on bed and breakfast accommodation.

We need to get away from the traditional label "bed and breakfast" as it seems to frighten Ministers. It should be possible to define what we mean – whether the definition is based on the number of rooms or the number of bed nights per year. We must tackle this issue and I regret it is not included in the Bill. I hope the Bill will be changed. It is a question of definition. People should not automatically think of Mrs. Murphy on the Dublin Road but that is what people from rural areas think of and I understand why.

That is correct.

No one wants to tell Mrs. Murphy she will have to pay rates. However, the situation has changed and we must address the definitions of residential, apart-hotels and the large concerns which are now in operation. There is much evasion which ought to be tackled and this is the opportunity to do so. People have been talking about a Valuation Bill for years and if we chicken out now we will not get back to this issue for a long time. I hope the Minister of State changes the Bill on Committee Stage.

Like all legislation, this Bill will be implemented on a national basis. One cannot have one rule for Dublin and another for the west. However, it is a matter of defining what is residential and what is not. We should ignore those offering bed and breakfast accommodation for a few nights in the summer and tackle the issue. This is a large problem and given the scale of operations in Dublin it would be a scandal if we let this opportunity pass.

I apologise for sounding repetitive but it happens that a number of speakers in the House are from Dublin. All speakers on this Bill seem to be from the same party, apart from Deputy Gregory, and I am delighted to see someone from a different party speaking. However, Labour Party and Fine Gael Members would say the same thing and I am disappointed some of them are not in the House.

The city council recently went through a crisis regarding striking a rate and agreeing Estimates for the year. Over seven council meetings many Opposition councillors had all the ideas in the world. The long awaited Valuation Bill was quoted and was certain people's Bible. Those people did not want to bite any bullet or do anything. Their only suggestions involved funny money. A few were brave enough to suggest cuts which would have destroyed the city but they spoke about what we could or should do with this Bill. They had all the ideas in the world over seven meetings, one of which went on for eight hours. However, I do not know where they are. Fine Gael Members may be seeking promotions but I do not know where the others are. They have gone on a sulk. It is a shame that having spent weeks talking about what they were going to suggest as regards this Bill, they do not have the neck to come into the House and speak. However, that is a political point which is not related to the Bill proper.

As regards Government buildings and State properties, some years ago a lump sum was paid in lieu of rates. This should be reintroduced. I thought we had moved away from the era when the State was a special case, and we have done so under many other headings. There was a time when the State and its agencies thought they were special under planning laws. However, the courts decided that the State and its agencies should go through a planning process, even if it is not quite the full shilling. This is the age of transparency and so on and the idea of exempting State properties is antiquated and old fashioned and belongs in the era before transparency and accountability. We should grapple with this problem.

I am coming at this issue from a Dublin perspective where local authorities feel they are providing a service but are not getting the tax or revenue. I do not see why the State should have special status. In this regard we should consider the changes which have taken place in the planning process. I may be incorrect but all land, including farm land, is exempt from rates. I am not proposing we should put rates on anyone's cows.

There is enough on them already.

At the Committee on the Environment and Local Government we talk a lot about the housing problem. There is little land left in Dublin. The land available in north Dublin, Kildare and Wicklow, on which there are cows, is valued at a certain amount. Am I correct that if the council rezones it and it becomes a valuable asset, rates will not be payable on it? Perhaps someone could clarify that. My understanding is that the rezoning of land does not give it any value.

The Minister for the Environment and Local Government is always talking about the amount of money he has invested in zoned land under his serviced land initiative. The Government is pouring millions of pounds into it and this is helping developers to build more new houses. We complain about developers who will not build and who are sitting on zoned and serviced land on which they are not paying any rates. We wonder why the Government has not invested the money in infrastructure and why we cannot force these people to build. Zoned land and land which has benefited from the serviced land initiative should be subject to rates. It seems contradictory that the Government is pouring millions of pounds of taxpayers' money into certain land yet we complain that the developer is sitting on it and will not build. The Government wants the developer to build but he just wants to produce 200 or 300 houses a year which will keep him, his family, his company and his workers in employment.

We are giving them all the carrots in the world, namely, the money which is being poured into the serviced land initiative, but there is no stick. The only stick is capital gains tax which might be higher in a few years' time. Zoned land should be subject to rates and serviced land should be valued at a higher rate. That is the only stick we can use to force developers to build. It seems silly if one Minister is giving all the carrots and another Minister is not using the stick when the opportunity arises. I could list the number of serviced land sites. There are 70,000 or 80,000 sites in the Dublin area alone of which only a fraction are being developed. They should be subject to rates.

This issue is topical in Dublin City Council. I am disappointed that speakers from Dublin constituencies on the other side of the House have not come in here this morning. There has been tremendous development in Dublin over the past ten or 15 years. The rate base of the city has decreased because many companies and stores have had their property devalued. There is no doubt the city has improved enormously, particularly when one remembers the wasteland it was ten or 15 years ago. However, local authorities must also survive. It is easy for the Government, regardless of which parties are in Government, to give tax breaks and rates relief for ten years without compensating the local authority which must provide the services. The rate base of the city is beginning to recover. It may show a net improvement in the next few years as some of the places which were built eight and ten years ago come into it. However, it will be the first net improve ment for many years. I wonder if we are being too generous by giving ten years' relief without compensating the local authorities affected.

I understand a cap will be imposed so that the revaluation will not lead to extra money being given to local authorities. Local authorities should not abuse it and get 50% extra revenue from it. However, I do not know if it is right to tie it too tightly to increases in the consumer price index. I would like to think there would be some flexibility. We all talk about giving local authorities extra power. However, power means responsibility. If we want local authorities to use their power, we must give them responsibility.

Local authorities will not abuse their rates because they are in competition with other local authorities, particularly in the Dublin area where there are four local authorities within the county. I am told the valuation of Dublin, Galway, Cork or any city is low compared with Belfast or Manchester. Given how local authorities scream and shout every year, one would think the last pound was being taken from their pockets. However, it is not businesses that pays the rates because businesses are only the agencies which collect them from the punters. Dublin and Galway are in competition not only with other cities within the State but with major developments in Belfast, Liverpool and Manchester. Our rates are not high. It is the responsibility of different local authorities to maintain a competitive edge. If Fingal County Council increases its rates, the shops in Blanchardstown will be more expensive than those in Dublin. Every local authority must be responsible and strike a balance.

I hope the Minister considers these issues. I will not discuss the Bill in detail because much of it is technical. Issues, such as that related to bed and breakfast establishments and rates on Government property, must be tackled. The points I made about zoned and serviced land should be taken on board. The issue of bed and breakfast establishments is about definition. It is a case of finding out how to draw the line. It would be a disgrace to lose this opportunity. I know there are different arguments and it has been a battle at Cabinet level. However, it is a bigger issue than Mrs. Murphy using a few rooms in the summer as a business. She should be excluded. This issue should be dealt with properly. The residential area has developed in many ways in the city and in rural areas as a result of the introduction of tax incentives. People are not using property as their first or second home so local authorities should get money from it.

I have spent a long time listening to many Governments talk about doing something about the valuation system. I, therefore, welcome the Bill. Like many other Members I have had many approaches from people who genuinely believe they were crucified by the way the system worked in the Valuation Office. I will return to that issue later.

When one considers that £456 million is riding on the method of calculating rates on commercial and industrial premises, one can see that it is a huge funding reservoir. It is also a huge taxation matter for property owners. While this is not a political point, over the years I have not ever heard more bitter rows being fought with great gusto about the method of valuation and revaluation of business premises, particularly in my part of the world. Businessmen and industrialists have told me that whatever way the base assessment was made, they could not see a relationship to the earning capacity of the business, whether it was a small village supermarket or a local garage. Comparing such a garage in a remote area that might not often see the Celtic tiger, with a garage in the same county, but near a major road with greater access to business and customers, it is difficult to understand that the same criteria was used.

I know the deductions that are made and I fully understand them, but from what I have read in the Bill I fail to understand how that will be changed. The central theme is that there must be some tie-back element to the earning capacity for that year or the preceding year. It is a bit like a notional assessment or the assessments that were done on farm land in the 1980s where one paid so much per acre. Much work was done on that as an alternative to farm tax. I did not find out what happened to all the work that was done on that occasion, but when Fianna Fáil returned to Government in 1987 that was forgotten about and we went over to the ordinary taxation system for all farmers.

The valuation issue has not been touched for many years. There are some aspects of the Bill I do not fully understand, including how the capping will be done. If I was cynical and particularly if I owned property, I would have to say that while the system might become more fair it will also become more expensive. In other words if there is to be a revaluation it will be upwards and that is what many business people are afraid of. On Committee Stage, the Minister will have an opportunity to explain in detail what he means by capping. How will the Minister cap it? I hope this will be well thought out. I am not a businessman, but I can imagine that there must be some element of fairness in this. I can see a few areas where it could be done.

It is a global cap to the authority or corporation.

Yes, but it will depend on the level of the cap. If the cap is very high there will be an opportunity for local authorities to drive it up.

It is based on the CPI.

We will tease it out on Committee Stage but there is a huge suspicion around the country that that will happen. The Minister will have an opportunity to explain the matter further on Committee Stage.

To return to the appeals part of the legislation, the Minister is building in a consultative process at the beginning. One of the things that has always amazed me about valuations, no more than with accountancy which is a fine industry, is that a group of valuers has grown up around them. They do a professional job and people pay them to look after their businesses. In my time in politics I have noticed that they have made a very good living out of this work. As the Minister is aware, many of them work on a "no foal, no fee" system whereby if the valuer can do nothing for a client the latter is not charged, but if a reduction in the valuation is obtained then the client pays the valuer 50% or 75% of the first year's savings. I assume that is well known to everybody and I know many people who do it. Under the system proposed in the Bill, it will be no different. There will be greater opportunities for interpretation which, as the Minister knows, often means that all sorts of professionals will get in on the act.

I do not understand how the consultative process, to which the Minister referred, will work. I assume what the Minister has in mind is a mechanism whereby the property owner can talk to the Valuation Office face to face or, as the Americans say, eyeball to eyeball. That could be a useful first step and many people would like to be given that opportunity.

I assume there will be no change in the rating responsibility which will remain with local authorities.


There is no change in that so there will be some element of local democracy at work all the time. We all accept that if a property has not been revalued for many years it is likely to be revalued upwards. I cannot understand how it could be any different. Once properties are revalued it is not so much a question of the actual valuation, but rather that everybody wants to know how it relates to the valuation of the pound when we strike the rates. I am glad that farm land has been omitted from the provisions of the Bill. It is extremely important that the Minister has done that because we have enough problems in the agricultural sector without having rates returning to farm land. If the valuation base is brought up, and I think that will happen, obviously the rate in the pound will have to decrease dramatically.

I would like to know where the cap will come into operation. For example, Galway County Council has to get whatever revenue it can to make up its accounts. There is a great opportunity here for officialdom to extract more rates through this mechanism, but I hope the Minister will not stand for it. While the rate in the pound could be reduced from 40p to 20p, at the same time, because the base valuation is higher, we could be taking much more money.

Instead of a notional figure, one will have the real figure.

I sincerely hope that figure will not be much higher than the current one. Perhaps I am cynical, but I can see trouble coming down the tracks on this one, big time. It will provide an opportunity to local authorities to jump on this bandwagon as well. That is why I want to hear the Minister's views on how the capping mechanism will be implemented. Will it be related to the intake of rates at present? In other words, if this Bill goes through in 2001 – and I assume it will – will rates collected under whatever headings in 2001 bear a direct relationship to what will happen in 2002? Is that where the connection is? One could cap the rates but bring in a new higher valuation system. There would be a huge jump the first year and there would be a connection after that. That is something the Minister would want to watch extremely closely.

I notice this will be done on a roll in basis and I confess I do not understand what is meant by that. Does it mean that in each county council and corporation area, this will be done over a number of years? In other words, will it be done in instalments?

One complete county council or corporation will be done together.

The whole country will not be done together and it will be done over a number of years. That is seems reasonable enough.

I come now to what I regard as a remarkable inclusion which I cannot understand. I see that the property of Teagasc, the farm advisory body, will be included for valuation from here on in. I find that very difficult to understand at a time when schools as such are exempt, and rightly so. If one takes the research end of Teagasc—

That will not be included. I said the educational and research aspects would not be included.

It would not want to be included. On the one hand, Teagasc will come back to the Exchequer to look for money to keep its show on the road while an the other hand, another Minister will take money from it. Obviously, that would not make sense. In so far as its buildings are concerned, would the State run college in Athenry, for instance, be exempt?

It is exempt. Education and research are exempt.

What about its headquarters in Sandymount? That is from where all the scientific reviews come. I will put it to the Minister another way – what is not exempt? If the colleges and its headquarters are exempt, why bother including it at all? I find it very difficult to understand what the Minister is going to include.

I cannot win.

I find it very difficult to understand what is included.

The commercial aspect.

If one takes Grange—

I suggest, Deputy, that you make your remarks through the Chair.

The Minister will have an opportunity to reply.

The Minister always like engagement and, in fairness to him, he does not bury his head in the sand. I will abide by your ruling, a Leas-Cheann Comhairle.

Any of the fund generating sources Teagasc has go back into the carousel that helps to promote education for young farmers, the research element and all the other things Teagasc does. That is something to which we will have to come back.

The health boards are included on the new hit list. At a time when the Exchequer must put millions of pounds into the health services, is this not an example of robbing Peter to pay Paul? I find it difficult to understand from where that is coming. I like the idea of exempting fish farms. That is reasonable because, at the best times, they have plenty of trouble. They are located in peripheral areas of the country where there are few opportunities. That is a very wise move and the fishing people will be delighted.

Deputy Noel Ahern spoke about bed and breakfasts. We would have awful trouble if bed and breakfasts were included. There would be an exodus of people who provide a very useful service for two or three months of the year. They would not bother to provide this service because a valuation officer would be looking in the window two months later and the few pounds they got would be of no use given the trouble into which they would walk. I do not know enough about the Dublin scene but accommodation is provided in the best environment and in the local areas where tourism grows and prospers. That accommodation is made available by house owners when their children are away on holidays and the woman of the house makes a few pounds. I am against anything that will interfere with that and, officially, the Minister is against that as well. It would not be worth the hassle and I think the tourism industry would be the loser in the long-term.

Many people in the business knew this had to happen but I hope I will not be back here in a year's time saying that the golden goose is laying better than ever and that the new valuation system has meant not only £450 million but another £100 million on top of it, all in the name of fairness and equity. Will the Minister give us a clearer idea on the capping process?

At the outset, I would like to make a few comments about the Opposition and its absence from the House this morning and this afternoon, except for the Galway East TDs, Deputies Connaughton and Ulick Burke, who kept the home side going.

There are other fish to fry.

The new Leader of Fine Gael said he was going to bring politics back to the people. He has started by not allowing his people to come into the House to discuss politics. It is a strange set up.

They will be here in good time and the Deputy will know about it.

As regards those on the left, I have heard Deputies Broughan and Shortall and Senators, who cannot come in here although they would like to, talk about rates and the problems of water charges and so on in Dublin Corporation. This is their opportunity to come in and speak yet there is neither sight nor sound of them. It is strange that the Opposition is not taking part in the democratic process about which it is so found of talking.

The Deputy is here and that is important.

I am sure Deputy Connaughton will be joining the others outside today and I hope everything goes well for him.

This Valuation Bill is very important and that is why I am disappointed that the other parties have not taken part in the debate. The Government in 1995 set up the consultative process to bring about an updating of the question of valuation. As we heard from the Minister and other speakers, the valuation legislation goes back to the 1830s and 1840s, more than 150 years ago. Over the years things have changed, as happens in life. Many changes are coming on stream. We need a root and branch examination of legislation to bring it up to date. This is what the Bill does.

In his contribution the Minister of State made it clear a number of times that he wanted to assure the people the change in the system of valuation is not for the purpose of increasing the rate take per se. There will be a change in the valuation basis bringing the net annual value into operation. The rate in the pound will change downwards in most cases in order to ensure people are not charged fantastic amounts of money. An example the Minister gave was that the rateable valuation could change from being £100 to £30,000 but that the person's rate charge will not increase 30,000 times whatever the rate in the pound is. It is important to get across to the general public that this change does not necessarily mean there will be a huge rise in the rates charged.

The rateable valuation will be confined to a rateable area such as east Cork. East Cork will not be the same as west Cork. That is a good idea or perhaps it would be confined to counties. I agree wholeheartedly that it should not be on a national basis. The Bill provides for exemptions on domestic property, agricultural land, State-occupied property and so on. Other buildings I would wish to have included for exemption purposes are dressing rooms for sports clubs, whether soccer or GAA. Most clubs have dressing rooms merely for togging out which cost a couple of hundred pounds. Will the Minister look at this area to see if it is feasible to have an exemption. Some clubs have bars and so on, but that is a different kettle of fish. Where business is transacted should be included and rated.

I welcome the Bill. In the long term it will be beneficial to the system and will help to bring the valuation scene into the 21st century.

I give way to the Minister.

I thank all the Deputies who contributed to the debate, particularly those on the Government side. It is most unfortunate that other matters got in the way of the main Opposition parties being involved in an important discussion. I have been a Member for almost 14 years and this issue has arisen on numerous occasions and certainly while I was a member of a local authority. Many Members who are still members of local authorities contributed to the debate. I am pleased that even those who contributed from the Opposition gave a general welcome to the new Valuation Bill. There is an understanding in the House of the thrust of the Bill and the direction in which it needs to go.

Matters raised in the debate here inevitably raised issues in regard to striking the rate in the pound or issues that relate properly to the local authorities. There will be an opportunity for further discussion of the issues that specifically relate to the Bill on Committee Stage. I will be happy to point Deputies in the direction of other matters with regard to issues that have been raised.

Almost unique in the context of this Bill, I, my officials, the commissioner and senior staff from the Valuation Office spent some time touring the country. It was an important exercise in that we chose key locations which we thought would encompass broad regional areas. We invited all the interested parties to come to public sessions, well in advance of the publication of the Bill, to tease out many of the issues that could and would be involved in it. I enjoyed that process which was a valuable one for me and everyone involved in the drafting of the Bill. We got feedback and information and heard the concerns raised by the local authorities and the commercial sector rep resented by various bodies from the Chamber of Commerce to business councils etc. If I was not to be involved in a Bill of this nature again it was an interesting and worthwhile exercise.

Many issues were raised in the debate but obviously we will deal with these at greater length on Committee Stage. One of the points raised related to a rolling revaluation. I shall try to respond to Deputy Connaughton in this regard. One local authority area will be completed at a time. In other words, an entire county council or an entire corporation area would valued. When that valuation base has been established the reference points for the valuation base will be within that local authority area on a particular date. If we were to try to value the entire country at the same we would choose a point that would be relevant to the entire country at the same time. By the time the process would be completed it would be some years down the road. I want to keep the valuation base up to date. This is a fundamental point. Neither I nor any Member wants to wait another 150 years to bring in legislation to value the entire country. One of the points raised at the public meetings around the country by various interested parties was that once the country has been valued, which will be in about five years, we will continue the process on a rolling basis; in other words, every place will be valued within ten years. In that way we will never be in a position in which the valuation base will be questionable.

Question put and agreed to.