Valuation (Amendment) (No. 2) Bill 2012: Second Stage

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

I am pleased to have this opportunity to bring the Valuation (Amendment) (No. 2) Bill 2012, which was initiated in the Seanad, to this House. The primary purpose of the Bill is to introduce measures that will enable the Commissioner of Valuation to accelerate the national programme of revaluation of all commercial and industrial properties across the State. The Bill makes important changes to the Valuation Act 2001 which will update the legislation in light of the experience of the operation of the Bill since its commencement in 2002. The Bill also extends exemptions from rates to not-for-profit child care providers and community sports clubs.

The Bill was initiated in the Seanad and, while Deputies can legitimately say it has taken a long time to reach this stage, significant work was done at official level, in consultation with industry stakeholders, and in the Seanad, to iron out issues in what is quite a technical piece of legislation. The issues raised on Second Stage in the Seanad were worked on by officials in consultation with stakeholders and resulted in a large number of Committee Stage amendments. We had a very good Committee Stage in Seanad Éireann. I wish to acknowledge the input of the Society of Chartered Surveyors Ireland, which is the main representative body for the valuation surveying profession, and other stakeholders. This work was built on during the Seanad debate on the Committee Stage amendments, which led to further refinements on Report Stage. The Bill was rigorously tested in the three Committee Stage sessions in the Seanad and all sides agreed that the Bill as passed by the Seanad is an improved piece of legislation that took on board the input of both stakeholders and members of the Seanad. I acknowledge their constructive input to the legislation.

The existing valuation legislation is primarily contained in the Valuation Act 2001, which provides for the valuation of all fixed property, including land and buildings. Valued also is incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The commercial and industrial sectors effectively constitute the rateable valuation base. The Valuation Office has responsibility for implementing and maintaining the valuation system. As Members are aware, it is the value assigned to a property by the Valuation Office multiplied by the annual rate on valuation, set by the local authority at its budgetary meeting each year, which determines the rates amount due from individual occupiers.

Could I ask whether the script has been circulated? I ask my officials to arrange for the script to be circulated. We will make those arrangements now. I apologise to the House.

On a point of order, is the Minister of State's script being circulated?

I just asked for the script to be circulated when Deputy Fleming was out of the Chamber. I apologise to the House. Does he wish me to pause until the script is available?

No, but it is bad form.

My apologies. We have a copy available now.

This legislation is concerned with the valuation of property for rates purposes but not with the setting or collection of rates. The basis of assessment for valuation purposes is the net annual value of a property. The net annual value 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 rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, usually a tenant or an owner occupier.

The national revaluation programme, which was provided for in the Valuation Act 2001 and which commenced in the greater Dublin area in 2005, is the first general valuation since the middle of the 19th century, and is a significant undertaking involving some 146,000 properties. The Valuation Act 2001 provides that valuation be carried out on a rolling basis. This means that each rating authority area will be separately valued as part of a planned sequential valuation of the whole country. The sequence is decided by the Commissioner of Valuation, who is independent in carrying out his function.

A key motivation for introducing the amending legislation is to expedite the national revaluation programme of commercial and industrial properties. Revaluation is all about rebalancing the overall rates burden in each local authority area, and I am conscious that there is pressure for the work to proceed at a more brisk pace. As stated, valuations are based on rental values. If there is to be a fair distribution of the rates burden, then valuation should be based on modern rental values and not those that were used as the basis of valuations 25 or more years ago.

Completion of a revaluation in a rating authority area will help to address some of the issues that arise in relation to the rates system. Rates are a charge levied annually on commercial property and are a necessary and stable source of funding for local authorities. Since a revaluation seeks to address movements in the relative values of property over time, a revaluation will offer respite to those that may have an unduly high rates bill for historical reasons. At a more aggregate level one could, in some cases, see a shift in the rates burden from a town centre to a new out-of-town retail facility. Where that occurs, revaluation may contribute positively to making town centres more attractive to prospective businesses.

Revaluation is a very important element in achieving correctness, equity and uniformity of valuations within a given local authority area, as it is the means through which changes in economic circumstances since the last revaluation are taken into account. Revaluations will be on a cycle once the first one is completed in a rating authority area, and each revaluation will be completed not less than five years and not more than ten years after the previous revaluation. Completing the first revaluation and getting all rating authorities on to the five-to-ten-year cycle will constitute a significant positive change to the valuation and rating system.

Although considerable progress has been made in recent years, there is still much that needs to be done. The present position is that, following the completion of revaluation in the four local authority areas in Dublin, the three former local authorities in Waterford and Limerick, more than 48,000 properties have been revalued. While that represents more than 33% of all rateable properties, it constitutes approximately 57% of the valuation base for levying rates.

The revaluation programme needs to move at a faster pace to bring the benefits of a modern valuation base to the rates system. In 2001, when the previous piece of legislation was being introduced, the expectation was that the complete revaluation of all commercial property would take ten years to complete. This assumption has proved over time to be wide of the mark and hugely optimistic. The current target for the completion of the revaluation programme is 2018.

Revaluations completed to date show that approximately 58% of properties will see a reduction in their rates bill and approximately 38% will see an increase, while the remainder are properties with no change or that are being rated for the first time. Generally speaking, and depending on the property category, use and location, of those that see a change in their rates liability, approximately three quarters see either a reduction or an increase of less than 40%. Some have seen very significant increases or decreases, but these have been examined and have occurred for good reason, sometimes because they should have been the subject of a revision of their valuation some time before the revaluation exercise took place.

As outlined, there are many positive reasons for having a rolling revaluation programme. The Bill seeks to introduce a number of measures to speed up the process and includes allowing elements of the work to be outsourced, the employment of computer-based methodologies and more participative involvement of the occupier in valuing property through a process that is referred to in the Bill as occupier-assisted valuation. I am proposing to make enabling provisions that would allow the commissioner to assign valuation work to valuers who are not officers of the Valuation Office. Currently, the commissioner can only assign valuation work to a member of his or her staff. This amendment will allow the commissioner to engage with the private sector directly through a tendering process. This would augment the internal capacity of the Valuation Office, increase the resources devoted to the revaluation programme and accelerate the delivery of the revaluation project. The commissioner intends to carry out a pilot project involving the use of external valuation providers. This is an innovative advance and presents a unique opportunity for a first public-private sector engagement in this area of the public service.

To complement these initiatives, there is provision to enable the Commissioner of Valuation to use general market data, or aggregated data, including statistical and computer-aided techniques, to assist in estimating the net annual values of groups, classes or categories of properties, where appropriate.

The use of computer-aided techniques is commonplace in other jurisdictions. It adds to the efficiency of valuation determination and also contributes to the accuracy and equity of revaluations. This is now provided for in section 5 of the Bill, amending section 13 of the current Act. A demonstration from an outsider's perspective of what technology can add to the system can be seen by using the detailed online map of all valuations available on the Valuation Office website.

I am also proposing to make enabling provisions in the Bill to give the commissioner capacity to introduce an occupier assisted valuation option for the valuation of commercial property. Initially, this would be done in one local authority area on a pilot basis. Section 12 of the Bill provides for the insertion of a new Part 5A dealing with occupier assisted valuation. Provision is made for the Minister to make regulations on the operation of occupier assisted valuation. In practical terms, this process will involve a more participative approach between the Valuation Office and the occupier than exists with direct valuation.

The occupier will be engaged at a very early part of the process. Guidance will be available to the occupier on the measurement of his or her premises, together with indicative valuation levels for the area in which the property is located. The occupier will return his or her valuation and valuations returned will be subject to a check by the Valuation Office. If the Valuation Office decides to change the valuation returned, the occupier will, as in all other situations, be able to make representations to the Valuation Office and appeal a decision to the Valuation Tribunal. The process will be more transparent to the occupier and bring a greater involvement and understanding of how the valuation is arrived at, which should demonstrate the efforts made to arrive at a correct, equitable and uniform valuation for all properties in the rating authority area. The progress made to date in Dublin, Waterford and Limerick, the experience gained in those revaluations and the measures in this Bill provide the platform for an accelerated completion of the revaluation of the remaining local authorities.

The Bill updates the valuation code to accord with modern conditions. The Bill corrects several identified deficiencies in the current legislative framework based on the practical experience of the Valuation Office, the Society of Chartered Surveyors and other stakeholders working with the current legislation over the past decade or so.

The Bill aims to streamline aspects of the current appeals process. This will also help to accelerate the pace at which the national revaluation programme is proceeding while ensuring in-depth engagement between the ratepayer and the Valuation Office in fixing the net annual value of a property. The Bill will retain the right of appeal to the tribunal where ratepayers are dissatisfied with a valuation and to the High Court on a point of law.

Under the current legislation, the ratepayer has the right to make representations at revision and revaluation stage to the Valuation Office in regard to the proposed valuation. This was a new feature of the valuation process introduced under the 2001 Act. It is, in effect, a first-instance appeal for which no fee is payable. In addition, the traditional right of appeal to the commissioner against the decision of the revision officer was then retained, as was the right of further appeal to the Valuation Tribunal. This process affords the ratepayer three opportunities to contest a valuation assessment. There is also a right of appeal to the High Court on a point of law.

In the modern context, streamlining this process is essential. It will allow the commissioner to deploy resources most efficiently in revising and revaluing properties on an ongoing basis. My officials have examined comparable appeal systems in other jurisdictions and have found that, in general, there are no more than two opportunities to appeal or raise an objection to a valuation assessment, while our current system provides three opportunities to appeal or raise an objection to a valuation. The existing additional right of appeal to the higher courts on a point of law will remain.

The comprehensive consideration of submissions made by ratepayers at the representation phase, which was introduced by the 2001 Act and the right to raise issues of rateability or quantum at tribunal stage, has convinced me that the right of appeal to the Commissioner of Valuation could be safely disposed of without unduly diminishing the rights of occupiers of property. Section 16 of the Bill proposes to remove this appeal stage. The Bill also provides in sections 11 and 14 for an extended period, from 28 days to 40 days, to make representations to the Valuation Office before the final valuation certificate is issued. Once the final certificate is issued, there is a right to appeal the decision to the independent Valuation Tribunal. As with all such appeals, a point of law can subsequently be appealed to the courts. Thus, the rights of ratepayers to due process is amply catered for in this legislation. The extended period of time in which to make representations will be welcomed by the business community.

Section 7 clarifies the criteria to be used in determining values when a revaluation is undertaken. It gives an equal weighting to correctness of value, equity and uniformity, thus codifying an important recent judgment of the High Court, by Ms Justice O'Malley, on the interpretation of the 2001 Act. Henceforth, these criteria will now be used by appellants in grounding their appeals and by the tribunal in considering such appeals following a revaluation. These provisions were the subject of much debate both in the Seanad and during a comprehensive engagement with stakeholders. An avoidance of doubt amendment to section 19 of the Bill, introduced on Report Stage in the Seanad, was widely welcomed by Senators on all sides of the House and by stakeholders, as a resolution to remaining concerns around the future interpretation of these provisions. I bring the Bill to this House in a better state as a result of that Report Stage amendment.

Section 15 of the Bill introduces a new provision to equip the commissioner with additional authority to address anomalies on the valuation list. This is an important provision. This amendment is to provide for exceptional circumstances where a decision by the revision manager not to change a valuation would otherwise lead to inequity and a lack or diminution of uniformity of value between certain properties in the same rating authority area. This might include a situation where there has been no material change of circumstances to justify a revision under section 28. The example often cited is where a service station has been bypassed by a motorway but no material change of circumstances, as defined in the legislation, technically exists which would bring about a revision and consequential reduction of the valuation level and there is no existing statutory power to address the problem. In such exceptional cases, the commissioner will have discretionary powers to direct a revision manager to amend the valuation of a property which he or she considers to be inaccurate. The commissioner will no longer have to rely on determinations of the Valuation Tribunal or the higher courts to address such anomalies. The new section 29A replaces section 40 of the Act which is proposed to be repealed by section 21 of the Bill. I wish to take this opportunity to emphasise that the purpose of this new provision is to address exceptional individual anomalies without setting aside the material change of circumstances provisions which have prevailed since the 2001 Act was implemented.

I will outline the new exemptions provided in the Bill. Section 38 of the Bill introduces exemptions for two categories of properties - property used for not-for-profit child care and community sport. A very conservative approach has been taken to the extension of exemption from rates to any grouping. Commercial rates are a key part of local government funding and if local government funding is to be maintained, then it is the remaining ratepayers who pick up the tab where a class of property is exempt. Hence, the conservative nature of the provision for exemptions I have adopted in this Bill. Any unjustified extension of exemption is very unfair on existing ratepayers who must pick up the burden. New exemptions also create precedents and raise expectations of further exemptions. Any extension of exemptions has to respect the importance of the ratings system to local government funding and the established valuation and rating principles that have been developed over a long period of time.

The proposed community sport exemption resolves an anomaly that exists where if a club has a bar, all of its premises become rateable. This issue is of concern to Deputies on all sides of the House and on which we had extensive discussions in the Seanad. As a result of consultation with the Opposition and with stakeholders, we have a better provision than in the original Bill. I thank Members for that constructive engagement.

The proposed change improves the legislation by granting an explicit exemption to community sport facilities and resolves a long-standing anomaly. The extension of the exemption to not-for-profit child care will bring a consistency of approach to a subset of the child care sector while respecting the principle that those who operate with the intention of making a profit remain rateable.

While I have covered the main changes in the Bill, provision is made for other proposals, many of which are of a technical nature. Section 2 introduces or amends a number of definitions, including defining the regional fisheries board - now Inland Fisheries Ireland - as a rating authority so as to allow for its revaluation and which is not possible under the 2001 Act. The linking of the definition of "charitable organisation" to that set out in the Charities Act 2009, and amending the definition of material change of circumstances to provide that a change in the licensed status of a premises, will qualify a property for a revision of its valuation. Sections 7 and 13 outline the position of the Commissioner of Valuation in relation to maintaining correctness, equity and uniformity in the valuation list. Section 7 sets out technical amendments relating to valuation orders. Section 10 will enable the correction of clerical errors in the revaluation list without the parties needing to go through the revision process. This is a common-sense provision. Based on practical experience, section 11 augments the provision governing the revaluation representation phase, including making allowance for events that impact on a valuation such as the subdivision of a property or the amalgamation of two properties.

Section 17 will prevent a person from using information they failed to provide in response to a formal notice to ground or support an appeal. Section 26 amends the definition of "net annual value" to return it to its original intended meaning. Section 27 provides for an adjustment to the valuation of a property, if determined using the contractor’s method, to better ensure that the valuation satisfies the objective of being correct, equitable and uniform. Section 28 addresses anomalies within the current legislative system which provides for the global valuation of public utility undertakings. Section 36 will provide for data sharing to improve the efficiency of the valuation process. Section 37 will give greater flexibility and operational efficiency to the Valuation Tribunal by allowing for an individual member of the tribunal to consider an appeal - at present a division must be comprised of three members - and will provide for the consideration of an appeal on the written submissions received without the need for an oral hearing.

Other technical amendments on valuing properties, separating the publication date of valuation lists and the date on which they become effective, consequential changes to the rates limitation order provision and amendments to the definition of "plant" are provided for in sections 6, 8, 9, 30 and 39.

There are also transitional provisions to cater for cases that will be in the system when the Bill is enacted. The basic principle is that if any substantial decision has been taken under the existing legislation then the existing legislation will apply until that case is concluded.

Unrelated to valuation, section 31 of the Bill provides for a new Part 12A which removes any doubt about property transferring from the Minister for Finance to the Minister for Public Expenditure and Reform. This was provided for in secondary legislation but it was advised, to avoid any doubt about the transfer of a limited category of properties, that a provision in primary legislation should be made. I am using this legislation as an opportunity to do so.

This is important legislation. Its provisions will facilitate the acceleration of the national revaluation programme, something which has been long overdue and which has been a matter of priority for the Government. It updates the legislation to provide for deficiencies identified through practical experience. It provides for efficiencies in the appeals process and in the operation of the Valuation Tribunal itself, and it makes minor extensions to exemptions from rates which correct anomalies and bring greater equity to small subsets of the commercial rates base. I commend the Bill to the House.

The Bill gives us an opportunity to discuss the rateable valuation system which operates in Ireland. It is a perfect opportunity to see not only whether the legislation is good but whether the system is fit for purpose.

Yesterday afternoon we dealt with Revised Estimates with the Minister for Public Expenditure and Reform, including Revised Estimates for the Valuation Office, and as this Bill was scheduled for discussion today I asked a few questions and said I would raise the issues again today. In reply to a parliamentary question yesterday, the Minister stated this is the first general revaluation of all commercial properties since the middle of the 19th century and progress is being made. I suggest progress is not being made.

Commercial rates are part of a three-legged stool which existed in the 19th century, along with agricultural rates, which were found to be unconstitutional, and domestic rates, which were abolished 40 years ago, before the Minister of State was even born.

Commercial rates are an old legacy from the 19th century and they are still here. This says quite a bit. I do not believe for a minute the Revenue Commissioners, who deal with general taxation and the collection of taxes, could operate a system based on the 19th century. We must look at the entire valuation system, commercial rates and the Valuation Office in this regard.

The Government pays lip service to this topic when it is asked about it but then ignores it on every other occasion. Nothing proves this more than the fact the Bill was published on 1 August 2012 and more than two and a half years later it is making its first appearance in the Dáil. This is the Government's commitment to dealing with commercial rates. I know it went to the Seanad last year, but it is still two and a half years later. If I were running the Valuation Office and I knew legislation would not see the light of day in the Dáil Chamber for at least two and a half years I would be in no rush to get on with revaluations throughout the country because the Government is in no rush to deal with it. The Government's attitude has set the tone for the lack of activity in the Valuation Office, and in doing so has undermined the entire existence of the valuation system we have at present.

Imagine the mess we would have if the Revenue Commissioners did not have an online system and people could not pay their taxes online. One cannot pay commercial rates online. I checked my local authority's website this morning, and one can pay online for practically everything a local authority does except commercial rates. I am not asking the Minister of State to change this, because the system is so broken that a little tinkering with the system is not the issue, but it is symptomatic. One can pay online every sort of a fine, waste management bills and almost anything else one likes to a local authority because they have become very efficient, but the system does not allow online payment for commercial rates. It is indicative of the fact this system has been left in the backwoods since the 19th century.

In 2001 legislation was published to commence the revaluation process. The briefing document I received yesterday contains the exact figures, and the Minister of State has just said 33% of the 146,000 properties have been revalued since the introduction of the 2001 legislation. He stated the in excess of 33% of all rateable properties which have been revalued constitutes approximately 57% of the valuation base. After 14 years only one third of the properties has been revalued, and the Minister of State has said today the other two thirds will be done in the next three years. This is not credible based on past experience. One might say the process was commenced in 2005 as opposed to 2001, but this would mean that after nine years only one third has been completed. Not at all will two thirds be done in the next few years.

I oppose everything to do with the Bill on Second Stage and I will table a series of amendments on Committee Stage, because this is not the legislation required to deal with commercial rates. The legislation contains a few little patches and band aids for technical faults which have been found in the system and issues causing problems, but even if this legislation was introduced and worked perfectly it would be working in a system which should not exist. There needs to be a new system from scratch for commercial rates, which are a business tax and must be done in a business-like manner.

I find it incredible that since 2005 only one third of the buildings has been revalued. It is testament for winding up the Valuation Office. The Government has agreed to this and I will come to Tailte Éireann which will be created through the amalgamation of Valuation Office, Ordnance Survey Ireland and the Property Registration Authority. I do not know the reasoning behind it. Perhaps it makes sense. Within it is an opportunity to have a proper commercial rates valuation system.

The commercial rates system should be in line with all other taxation systems in Ireland. Income tax is self-assessed, as is corporation tax. People fill out their accounts and send in the amount owed, subject to audit and stringent penalties and arrears if they are found not to make proper returns. The Revenue Commissioners have great methods within their systems to see whether what is received from an industry is valid, and they will spot the exceptions and know where to go. Capital taxes are self-assessed; one fills in a capital gains tax form or a capital acquisitions tax form, and the executor of an estate does the valuation for inheritance tax. The new local property tax is self-assessed, and if we have self-assessment for 1.5 million houses we should be able to have self-assessment for 146,000 commercial properties.

We should bear in mind that people who are in commercial properties and businesses would have a better way of knowing how to do a self-assessment than many householders, who would never have been asked to do something like that in regard to local property tax. I asked the Minister of State a question about self-assessment in the House yesterday morning. He has provided for an enabling provision to allow one county to be selected for a pilot scheme. A period of two or three years would be allowed for the pilot scheme, then a year to assess it and then we might move on to two counties at that stage. That enabling provision to allow one county to do a pilot scheme is all that is provided for, and that was probably indicated yesterday at the committee. In response to a question I asked the Minister of Sate about self-assessment yesterday, he replied that this requires the application of a uniform approach and that it was much more complex than the self-assessment of local property tax, which has been successful but which cannot be replicated in this situation. The people who wrote the Minister of State's script yesterday said the issue was too complex and that he could not go there, but I am surprised that he bought that line. He probably did not have time to read it. Of course everything is complex; that is why we are here. If it was simple, we would not even have to talk about it. The Minister of State's reply was that we could value all houses through self-assessment, but it is too complex to do that for a business. However, the reverse is the case; a business should be more capable of self-assessment. The fact that it is complex is no excuse for not doing it. However, I do not even believe it is complex. That was a fob-off in the reply I got yesterday.

The Minister of State spoke about the provision allowing owner-assisted valuation, and it was confirmed yesterday that this would apply only to one local authority area, as indicated in the briefing notes. I challenge everything about this legislation. There is no reason this item of business taxation should be so separate from every other taxation method, but it is probably because it is a 19th century system drawn up by the Valuation Office. Rates are struck by the local authority, and the system has escaped proper examination. I am not saying that the levying or collecting of it should go to the Revenue Commissioners, although that is something we may come to consider, as it might be more efficient, although it might not be. The main reason I have a reservation about it is what the Government did with the Local Government Fund - it took money collected through local property taxes and motor taxation for local government and is now giving 30% of it to Irish Water. If I could be sure the money collected by the Revenue Commissioners under a rateable system would go back in an efficient manner to the local authorities, that would be worth considering, but currently the Government could not be trusted to do that because it would probably end up giving some of it to Irish Water, saying that businesses use water, and while it would acknowledge that businesses pay rates, it would charge them this as well.

They already pay water charges.

They already pay for water, and the public will pay for water, but the motor tax revenue will go to Irish Water as a subvention. That was last week's issue, but I am raising it again today.

All other taxes - I mentioned some of the main ones - are related to levels of business activity. If one's turnover goes up one's VAT goes up, and if one's turnover goes down one's VAT goes down. If a business goes up its excise duties go up, and they go down if the business goes down. If a business is doing well and takes on more employees, it will have bigger PAYE, PRSI and universal social charge bills to pay. If a business is not doing well and has fewer employees, its taxation costs go down. That applies to all taxes - income tax, corporation tax and capital tax - and also to self-assessment, while the other taxes that are collected from businesses, namely VAT, excise duties and payroll taxes, are all related to the level of business activity. However, this is a fixed charge, and it is the only one I can think of, although there might be a few more. The Minister of State might say that motor tax is a fixed charge, but one can change one's car if one wants to pay a lower motor tax rate; one does not have that option if one is trying to run a business. We need an entire root and branch examination of this area.

The Government is setting up Tailte Éireann, the name of the Government body formed by the merger of the Property Registration Authority, Ordnance Survey Ireland and the Valuation Office. The extent to which the Government is serious about dealing with that amalgamation of the Valuation Office can be shown by the fact that proposed legislation is on the C list of the legislative programme, which means the heads of the Bill have not yet been agreed. It will not see the light of day in the term of this Government. That is the level of the Government's commitment to streamlining the Valuation Office. If by some mistake that legislation proceeds, the first thing that will happen, as happens in every new State organisation - I might have said this here yesterday - is that the Government will set up a new State board. The Public Appointments Service will be involved and the Minister will appoint the board and an interim chairman. The body will require a new corporate governance procedure and a new chief executive will need to be hired. He will have to hire the people under him and the people under him will spend the next year interviewing people for different positions. Every time a new organisation is set up, there is a corporate governance procedure, new staff take up positions and the former staff who are public servants may not transfer to the new body, in which case they will be redeployed in the public service. That is provided for in the Haddington Road agreement and I am sure it will be provided for in any successor agreement. There is no loss of income or position for anybody in regard to the Valuation Office due to the change in structure, but a further two years will be lost in the process of that change. I do not know how the Minister of State believes that during that period he will get two thirds of the properties in the country valued, when only one third of them could be valued since 2001. It is not credible. This legislation might have some merit, but it is not worth even discussing because the foundation on which it is based has long passed its sell-by date.

I want to pick up a point that the Minister of State mentioned in his speech. It was an effort by him to be helpful. He gave the example of a material change of circumstances and he cited the example of a motorway bypass, with which I would agree. It is common sense. However, he did not address the issue involved. He said the commissioner would have discretion, but he does not have to do it.

He does not have discretion at the moment.

The Minister of State is giving him discretion. The Valuation Office has often been in court about revaluations in cases in which the legislation has provided that it shall do something, but that does not mean it ends up doing so. It may win or lose a court case. That should be a direction; it should not come down to whether the commissioner feels like doing it. That might never happen. He might choose not to exercise that discretion because, to refer to other documentation from the Estimates meeting yesterday and notes we got, his priority is the national revaluation programme. The key priority of the Valuation Office is to deal with this ongoing programme, which is being rolled out to a few more counties this year. The commissioner - I do not know whether the officer will be male or female - will not want to divert resources away from that programme into revisions, but of course revisions must happen because every time a new planning permission is granted it is sent from the local authority to the Valuation Office advising that this is a new building and a new business and requesting that it be revalued in order that rates can be applied to it. That is the way the system works. The Valuation Office will be very busy getting new businesses into the system and accounting for any changes to structures as a result of planning permissions, dealing with the national revaluation programme and setting up the new organisation. The Minister of State thinks the commissioner will have time for discretion in the few hardship cases that arise, and I would like to agree with him, but there is no basis for saying that. It it is wishful thinking. I would like it to happen, but there is no basis upon which one can have any confidence that it will happen.

This is probably the only tax that I can think of for which the bill is determined without reference to the business or the people running it. The Valuation Office has a valuation from years ago. The Minister of State indicated that the five-to-ten-year revaluation period was optimistic. It was a polite way of saying it did not happen. The Valuation Office sets the valuation and then it goes to the local authority. We all understand that system and we think everybody else understands it. When it comes to the annual Estimates process, local authorities can see what they will get from the Local Government Fund and from the Department of Transport, Tourism and Sport for roads, as well as funding from their own resources, and note their level of expenditure.

They have to hit a bottom line to balance their books. That figure is calculated by taking what is required to balance the books by the total county valuation of all the properties in the county for commercial purposes, multiplied by an arbitrary mathematical figure to balance the books. In recent years, thankfully, there have been very few increases in the local multiplier by most local authorities.

There are two public bodies setting the bill, but there is no recognition of the current business taking place in a business premises. The Valuation Office and local authorities set the rate at the annual estimates meeting. It is the only tax I can think of where a taxpayer is presented with a bill, and is told what to pay whether one likes it, it is appropriate, one can afford it or one is profitable. It is unfair and that system has to be realigned. There may be a simpler way of doing things. I am not offering a solution, but rather a point for discussion.

The Valuation Office will tell one that the 146,000 premises around the country which are occupied are, by and large, paying rent. In truth, there is a correlation between the market value of the rent, the rates charge which comes from the Valuation Office and the local government estimates process. Those percentages are fairly well established across the country and are probably fairly uniform within a couple of per cent.

A simpler way of doing this would be to take the rent bill of a property into account. If, for example, it is €10,000 a year one would send a cheque of X% of the rates to the county council. That is the true valuation of the property for the business in that year. The figures for the rent bill could be self-assessed or otherwise verified, and a percentage sent to the local authority. I have not suggested starving local authorities of money in anything I have said. If such a system was in place it would beg the question of why one would need a valuation office at all. It may have other responsibilities in respect of national utilities.

One can ask whether there is a simpler way of setting rates for ratepayers in a county. That can be done without damaging the overall rates taken in a county. Self-assessment is one possible option. People will tell the Minister of State that would be very complex and not to go there. He is too bright to fall for that. I ask him to consider the proposal in a wider context. I have not said what the percentage should be, but there is an option. We have a proven value for every business in the country.

I wish to show the Minister how constricted the Bill is. Under the current valuation system and what is proposed, local authorities which want to help to rejuvenate some of the main streets in their towns cannot do so through the rates system because they are obliged to charge the rates that have been determined. They do not have the option to do otherwise. Some businesses which go bust might end up having rates written off if they are not collectable, but local authorities cannot decide to take half of the legal rate and declare a business as up-to-date, as the current legislation and the Bill do not allow for that.

One local authority has had to use great resources and imagination to get around the nonsense we have created in valuation legislation. Laois County Council is a model for other counties, but they should not have to follow it. The legislation should be changed so that this can happen without Laois County Council having to introduce an extraordinary scheme to get around the rigidity that is the commercial rates system. It is a business incentive scheme and is currently available for Portlaoise and Abbeyleix. The Minister of State can learn from this as it is very innovative.

It is intended to extend it to Rathdowney, Mountmellick, Portarlington and Mountrath in the near future. It is on the council's website. The aim of the scheme is to encourage the use of vacant commercial premises within a designated area of Portlaoise over a three-year period. The incentive scheme will assist new commercial businesses in setting up in the Main Street area of Portlaoise, which is the traditional retailing, commercial and social heart of the town.

With limited resources from the county council's fund, it is implementing the initiative to encourage new businesses to establish in these areas. However, having considered the commercial reality of businesses in Portlaoise, Laois County Council has announced the use of vacant commercial premises in the Main Street area of Portlaoise. The following statement demonstrates how it intends to get around the nonsense of the rates system: "The intent of the scheme is to provide a grant incentive for new businesses to locate in premises that have been vacant for a period exceeding six months and to encourage diversity of retail opportunities within a designated area." The grant is not a rates reduction because the law does not allow that. The council has had to invent a new and unique grants system. The grant can provide the financial assistance that makes it attractive for new business to consider setting up in an area where there are a number of vacant shop units. These premises are at present not yielding any rates for the council, therefore this is of benefit to it.

The objectives of the scheme are to promote the development and enhancement of retail floor space in the town centre, enhance the viability of the town centre, support the continued role of the town centre, encourage new businesses to occupy commercial premises or shops that have been vacant over a period of time, encourage diversity of business opportunities within the town, provide limited financial assistance to those businesses through the grant scheme and provide an income for the council and jobs for the town. To be eligible for the scheme a shop must be rated. Premises vacant for more than six months would be eligible for a grant of 75% of the rates bill in year one, 50% in year two and 25% in year three. The maximum number of years allowed would be three. One can see how the scheme would work.

People have to pay the rent, but can fill in an application form from the council and receive a payment from the local authority which is called a grant. It cannot be given legally as a rate reduction, rebate or discount because of the cumbersome legislation. It has had to, therefore, invent a grant scheme. That demonstrates what local authorities have had to do to get around the current legislation.

The areas covered by the scheme in Laois are Main Street, Market Square to the roundabout on Bridge Street, Church Avenue, Church Street and Railway Street to the roundabout and Well Road to the junction with James Fintan Lalor Avenue. A map of the area has been published. In terms of the proposed use, the following rules apply: use as a shop as defined under class 1 of the planning and development regulations 2001; office use as per class 2 and 3 of the aforementioned regulations; use for medical or health professional clinics; or use as a crèche, day nursery or day centre.

There are exclusions, for good reason. Use is not permitted for the following businesses: takeaways, amusement arcades, head shops, betting offices, nightclubs or public houses, and unwanted jewellery and cash for gold shops. Other businesses are also excluded because too many of them are popping up in the town. The council was very clear about the type of good development it wanted in the town, and it is to be encouraged in that. The new scheme is up and running.

In case the Minister of State has any queries or is told it is a complex scheme, I can assure him that a tax clearance certificate will be required as part of the application for the grant, approved applicants must sign up to the payment of rates by standing order and accounts must be paid in full each year. One can see that while the council will collect rates, it is prepared to give something back. It is a pity it could not be done through the rates system. The council is to be commended, but there should have been an easier way to address the issue. The current legislation is forcing councils to do such things.

My colleague, Deputy McGuinness, introduced the Local Government (Rates and Miscellaneous Provisions) Bill on Friday, 21 November 2014. The Government shot it down and said there were issues with it, but its substance was good. We need to look beyond the nitty-gritty of the problem.

The difficulty I have is that much of the discussion on the valuation system is about the tribunal and appeals system. A system will be set up and one will be able to appeal internally. The new appeals system will involve a tribunal. I want to know before we start why we are setting up such a complex appeals system. It makes me wonder why I am in this space. An appeals system should be very simple.

If somebody has a problem with tax, that person could go to an appeals commissioner but that office is hardly heard of because the system works. That the appeals system and valuation tribunal is so fundamental proves that the basic system has an issue. The Minister of State can see where I am coming from.

I will highlight one or two points in the briefing document we received yesterday in the Estimates meeting. I can point out two elements of which the Minister is not aware. The provision for the Valuation Office was €8.904 million, with the actual expenditure at €6.67 million; it did not even do the job the Oireachtas gave it the money to do. It is not even operating in first gear.

The Deputy's party did not give it the tools to do the job.

The Government did not bring in the legislation. The document we received indicated the hope that the legislation published in 2012 - some two and a half years ago - would have been enacted last year. It is only being introduced now. The Government has missed the boat. It has not even bolted the door after the horse has gone, as it was a bad door and bad stable to start with. The horse is better off out of the stable.

This amalgamation issue must be examined. The subheading for this year requests funding for ongoing development of strategic ICT and geographic information systems that are required, pending the amalgamation. There is no timescale on the process but this would be a great way to slow down the system. A figure has been provided for the pilot self-assessment or occupier-assisted valuation scheme but it is only mentioned for one local authority area. There is a simpler way to deal with it. The targets for 2015 are only to move on for the Valuation Office orders for Galway city and counties Carlow and Kilkenny. The Government believes the rest of the authorities will be done in the next four years.

The Government wants to complete the required global valuations and asset valuation mechanisms. Irish Water comes into this, so will we get a briefing note on Committee Stage on the protocol used by the Valuation Office to value Irish Water? That has never been done before. The Minister has mentioned a figure of €60 million but nobody knows where that came from. We want to see it worked out, as I indicated at the committee, and we want to see how the global valuation for Irish Water is formulated before we pass the legislation. We will have amendments in that respect.

This is a 19th century system and two thirds of it has gone with the elimination of agricultural and domestic rates. This should have been done 20 or 30 years ago and we should now have a self-assessment system, like every other tax in the country. The amount should be based on profitability, level of business and ability to pay. None of this is included in the legislation, which is why we oppose it.

I welcome that we have a Bill, however late and imperfect. The system is from the 1800s and I have had many difficulties with it as a public representative, even before I came near this building, because of the problems experienced by constituents. It is clear that something does need to be done with rates, and this legislation represents an attempt by the Government to do this. It was originally introduced in the Seanad with the support of the Minister and we have seen a number of other proposals from Government and Opposition Members on the issue over the past two years.

I was happy to support the proposal on rateable valuations for community and sports organisations. We have all raised the issue of excluding parts of these properties other than bars from being subject to rates. Unfortunately, although the Government did not oppose the First Reading of an Opposition Bill, nothing has been done subsequently or in this Bill to address the case of premises owned by such organisations. We must make the issue clear in this Bill but the changes to the definition of charitable organisations included in section 2 do not address the problem in question.

There are other issues raised by this Bill which have been highlighted by a number of groups and which will need to be addressed through amendment if it proceeds to Committee Stage. There is clearly an urgent need to address the rates issue, as it has not been looked at for a number of years. It has been claimed by people involved with small businesses in particular that the failure to reassess rates during the recent downturn proved fatal to a sizeable number of small businesses which were unable to pay rates from a declining income. The current regime under which valuations are made dates back to 2002 and originates in the system from the 1800s. That was before the massive financial collapse, which led to a consequent collapse in incomes for many commercial businesses nationwide. At present there is no facility to provide for revision of a property’s rateable valuation based on those downward movements in values.

This is something I have raised before in the context of legacy rates, which need to be addressed. These are hangovers from previous occupiers and there is a need to assess new businesses on the basis of their own viability rather than on what might have been the case with previous occupiers. The fact that many premises were and are empty proves that rates and rents continue to present a massive obstacle in the way of start-up enterprises. The consequences of that can be seen in the many empty premises that blight the streets, towns and villages of the country. We can see it right around the State, with the commercial hearts of towns lying derelict, despite the efforts of tidy towns committees or surviving businesses. In Laois, in towns and villages like Mountmellick, Mountrath, Abbeyleix, Rathdowney, the formerly vibrant area of Portarlington, Stradbally and Ballinakill, there are sections of streets closed down. I know rates are not the only problem. It is welcome that the Bill has provision for material change in circumstances, although we may need to amend the proposal to improve it. If a licence is gone from a public house, the premises would be worth a fraction of the value - if it was ever worth it - from the boom. That changes everything. The old AIB premises in Mountrath is worth a small fraction now of what it was worth a number of years ago. There are many other examples throughout the county. In Portarlington and other towns, the nature of what is happening and what can operate in the premises has changed.

I have mentioned Laois towns like Mountmellick, Portarlington, Mountrath and Rathdowney that have a section of a street that lies vacant. Surely it would be better for the local authority, the community and the local economy, which is part of the national economy, if we could get some income from those properties which now lie vacant. There was an earlier reference to a business incentive scheme in Laois and I proposed a similar scheme 12 years ago. I was nearly devoured at that stage by the colleagues of people who are now lauding that scheme. There could be an incentive provided for starting new businesses and although there is an argument that existing businesses could be displaced, there are ways of dealing with such issues. Laois County Council has introduced an innovative scheme with grants instead of rate reductions.

There is no reason that there cannot be a system for towns such as Mountmellick, Rathdowney, Mountrath or the other towns I mentioned to provide the incentive of a rates reduction for a new business that is not displacing or challenging an existing business providing the same service in the same area. It could be a gradual scale of 25% of the rates in the first year, 50% in the second year and 75% in the third year. We have done something similar for getting people back into employment and there has been some success with it. It has not always been successful, but we do not have success with everything. There is no single solution to this, but such an incentive should form part of the package for trying to get town and village centres revitalised and inhabited again.

It is startling to drive through, not to mind walk around, towns throughout the State. In Laois, for example, it is startling to count the number of vacant premises as one walks around the towns. Only a handful of businesses are now operating on O'Connell Square in the centre of Mountmellick, where previously there were dozens of businesses. There is also the issue of getting people back to living in town centres. That must be part of the solution as well. We must make it fashionable again to live in town centres and to use the space over shops. Where there are existing businesses or shop units - it might be a Centra or a Spar - one regularly sees that the storeys above are derelict or semi-derelict. That does not augur well for the future. We must consider that as part of an overall package. The Laois scheme is an effort by Laois County Council to do something about all of that. However, it is also necessary that the Government and the Departments of Finance and Environment, Community and Local Government examine issues such as rates.

I must also mention the issue of upward only rent reviews, and this is not an attempt to head-butt the Minister on the matter. It is a problem. It is lunacy to have a situation where commercial rents can only go upwards. Imagine trying to run a business on the basis that something can only go upwards in price and that one can never reduce the price of something on the shelf. No business could operate like that. We are talking about commercial realities and the world of capitalism here. It is outside this building. When one walks onto Kildare Street one is into that world. We must try to deal with this issue.

Spokespersons for the Government have said there is a constitutional impediment. I have heard that said in respect of many things over the last 30 years and, to be honest, listening to it has put grey hairs on my head. I am extremely concerned about this. If there is an impediment, why not change that clause in the Constitution? We are changing the Constitution to give a young person the right to become President. I support that, but it will hardly shake the world. This is a far more important issue for this Government to address, but it has failed to do so. The previous Government also failed to address it so the current Government inherited the problem. The two issues of rates based on the real value of the property and upward only rents must form part of a package.

We repeatedly hear lectures about enterprise. Our party wishes to see businesses survive and develop. We want to give people a leg up, particularly people in small businesses. Everybody is aware of the statistics regarding the number of people employed by small business. Members of this House have a responsibility to deal with the rent issue. We cannot simply doddle along through the Government's term and leave it for the next Government to tackle. The attitude is that the five years are nearly over so the Government cannot do it. Somebody must grasp this issue. I appeal to the Government to do it, given that it has approximately 14 months left in office so it has the opportunity. Dealing with this issue would leave a far greater legacy, particularly for regional development and for town centres. I have given the example of the towns in Laois. The problem of upward only rents is having a huge effect on the town of Portlaoise, as is the rigidity of the rates scheme.

We are supposed to be experiencing a significant economic upturn, or at least the beginnings of such an upturn. I hope that proves to be the case, but the fact that new businesses are still being forced to close their doors within a short period of starting up is worrying. In that context, redressing the problem with rates is important but I am not confident this Bill does enough to do that. We must ensure that we can have an impact. The Government's record in respect of rent reviews is not encouraging with regard to creating the conditions where start-up enterprises have a better chance of thriving without having to set aside a huge chunk of their income to pay rents which are often arbitrarily increased. These are the two major issues that continue to be raised by small businesses.

The consequences of failing to alleviate the burden on small businesses can be seen in the many premises that remain empty throughout the country. Even in Dublin, and close to Leinster House which is in the highest value area of the city, we can see premises that remain unused or premises where new businesses have opened in the last year or two but closed again within a short period. Many of those business owners claim that they would have had a viable business but they were unable to survive due to the massive burden of rates and rents.

With regard to the provision in section 4 relating to the exemption of State property for the purposes of rates, how does this relate to Irish Water? Irish Water received an exemption. First, the Government took a bill of €500 million back from Irish Water and handed it to Joe and Mary public by giving it to the Minister for Finance, Deputy Noonan. It related to the money owed to the Housing Finance Agency for water services. The Government also drew a line through a little over €59 million in rates this year. Irish Water paid over €40 million last year but this year it will pay nothing. As far as I am aware, it is the only commercial semi-State company that is not paying rates. Bord na Móna, Coillte and the ESB are substantial ratepayers. They make a substantial contribution to Laois County Council because they have headquarters or branches in County Laois.

The sleight of hand regarding Irish Water has made it rates exempt. That has been done to improve its balance sheet. It is part of the voodoo economics the Government has engaged in to make Irish Water look right for EUROSTAT and to keep as much as possible off-balance sheet. Will Irish Water be exempt forever? Is it just for this year or will it enjoy the same privilege of not having to pay rates next year? Again, the taxpayer will pick up the tab.

Section 6 provides for the appointment of a person who is not an officer of the Commissioner of Valuation or attached to the Valuation Tribunal to carry out valuations. There must be a clearer definition of who that will be. Is it proposed that such an appointee might come from a private company engaged in the property sector? Will we outsource this to the agents of developers? This proposed outsourcing has serious implications. It would not be a healthy development and there must be a clearer explanation of who it is proposed might assume such an important role. If it is a local valuer, does the Minister know how many auctioneers and valuers there are in the country? One cannot throw a stone without hitting one, given that so many auctioneers and valuers licences were issued over the years. I am very concerned about somebody carrying out that role on behalf of the Government and of the taxpayer. Self assessment for rates has been suggested. We have done it for local property tax, LPT, so I cannot see why it cannot be done for rates. It has also been used for other forms of taxation. However, to outsource this to companies and people who might have a far different interest from the people paying the rates is very worrying.

Debate adjourned.