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

Question again proposed: "That the Bill be now read a Second Time."

To continue where I left off, section 6 proposes 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. It needs to be made clearer what the intention is in the Bill. The concern my party has relates to the possible outsourcing of that to a company involved in the property sector. This poses considerable risks. Many things were outsourced by the previous Government, and we saw the problems that caused in terms of the influence the contracted party can have over the public sector and how things can be manipulated by consultants and others.

Sometimes, people criticise the Civil Service but large parts of it work very well. Of course there is always need for improvement and to update, upgrade and make things more efficient. However, we must not throw out what is good nor lose sight of it. The one thing the Civil Service is good at is keeping things in a straight line. Civil servants are very cautious and careful. Some whom I have met are overly cautious and too careful for my liking but that is the nature of things. That is the tension between elected representatives and civil servants. What the Minister of State has outlined poses considerable risks. Self-assessment is one suggestion that was previously made and it should be seriously considered.

The proposal in section 7 to publish a list of properties prior to rates being imposed would be a good move, as it would allow for a more transparent process, and for the case to be made on new valuations. That would perhaps help to address the situation I referred to earlier where businesses claim that they are being subjected to rates that bear no relation to the climate in which they are attempting to operate.

Section 10 also touches on the area of appeals regarding valuations. Similarly, section 14 allows an occupier a period of 40 days in which to make an appeal in a case where the commissioner has decided that there should not be a downward revision of rates due to changed circumstances. It has been argued that there should be a longer period than 40 days in which such appeals can be made to allow people more time to make a proper case.

It has been argued that the definition of "material change in circumstances" needs to be widened. A broader definition would allow a ratepayer to seek a revision of a rateable valuation where there has been a significant fall in a property’s net value or rental value since the rateable valuation was last entered in the valuation list. Footfall and the location of a property are considerations for staff of the Valuation Office when they make a determination on the rateable valuation of a property. If premises in a town centre have only 30% to 40% occupancy that must be factored into the process.

One could ask whether there is a case to be made for mandatory revaluations on a more regular basis. I was made aware this week of a good example of the consequences of the failure to re-assess rates in the context of the changed economic climate. It relates to a premises in south Dublin which has been mostly vacant since 2007. The main reason given for the failure to rent the premises to a new occupier is the difficulty of sustaining a business because the valuation and rates on which the rent is based bear no relation to the radically changed economic climate in the past ten years. When the premises was first valued, the rent and rate assessment took place in the 2000s and the economic situation and everything else is completely different now. The current rates bill is based on a rateable value of €56,400. That was based on an assessment made in September 2005 by South Dublin County Council. That was at a time when retail income levels even for the smallest units had rocketed. At the time rents were at an all-time, historic high. The rate was not sustainable since the downturn in 2008. That proves we need more regular revaluations based on changed economic circumstances.

The case I have outlined is very graphic but it is not uncommon. I have heard of other such cases. It has been argued that not only the current regulations, but also the provisions in the Bill, provide a definition of changed circumstances that would make it very difficult for current occupiers to secure an assessment based on changed circumstances as they relate to income levels and rent. If the Government is serious about maximising the potential of the improved economic conditions, it must do more to address the situation.

I am aware of the importance of rates, in particular as an income source for local authorities. We spoke many times about the narrow basis of local authorities to generate funding. The local property tax should go to the Minister for the Environment, Community and Local Government. I accept the point does not relate to the matter under discussion but a minimum of 80% of local property tax should go to the local authority where it is collected. It should not be sucked out and brought into general Exchequer funding and siphoned off to bodies such as Irish Water. We must maintain the rateable base but we must do so in as fair a way as possible.

Getting businesses to return to vacant properties would encourage an upturn in local economies through increased employment and local spending, which would benefit the wider community. Such activity might appear to be small and insignificant but local spending makes an incremental difference when it happens in hundreds or thousands of places throughout the country. In turn, that will benefit local authorities because towns such as those I mentioned which get nothing currently would get rates paid. Instead of having a row of empty shops there is a benefit if two or three premises are occupied, even if they are paying half the specified rate.

When determining the rateable valuation of a premises, consideration must be given to the type of business in operation. Currently, a bank next door to a greengrocer with the same size of premises pays the same rate even though the businesses are different. Banks operate on a completely different basis. Banks and greengrocers must have different rates. The income level must be factored into the valuation. Revenue knows the income level. One cannot fiddle such details even if the system is based on self-assessment because the figures are on Revenue's books. The income from a business must have some bearing on the rateable valuation.

There are a number of ways in which the Bill could be improved, some of which can be addressed on Committee Stage through relevant amendments. I refer to provisions to take account of the radically changed circumstances which have pertained since the onset of the economic downturn six to seven years ago. While it might be argued that we are now in the early stages of an economic upturn, and I hope we are, it is clear that rates and rent still present an obstacle, in some cases on a huge scale. It can be a tipping point in terms of survival for new businesses when they start up.

The Bill does not properly address many of the issues I have outlined. I welcome the update of the previous system. The system was due to be overhauled in 2012 but this is the here and now. Tomorrow is the first day of the future. We should try to make the Bill as good and fair as we can in order to have a good, transparent system of rates that will help small businesses and employment and also help to fund local authorities in a sustainable way. I urge the Government to be open to the amendments. We do not table them in an attempt to head butt the Government or to have a go at it. We are not always right either, but we table the amendments sincerely in an attempt to ensure we have the best possible legislation for small businesses, local authorities and the economy.

The next speaking slot is being shared by Deputies Mick Wallace and Michael Fitzmaurice. Is that agreed? Agreed.

There are some good things in the Bill and some things we would like to improve. I accept a strategy is currently being developed for rural areas. We welcome anything that will put a bit of life into rural towns and villages.

Shops and businesses are closing down in rural Ireland and high rates are the main problem, with businesses being stifled as a result. Every business that closes down means less money, and the maths do not add up. I understand that rates must be collected and paid and I am not naive enough to think we could get rid of them, lock, stock and barrel. I suggest that the rate should be based on the worst year of the previous three or four years and businesses should be given some breathing space because for every business that closes there is less money being raised by rates. The equalisation fund could be used as a stimulus package. There should be an effort to encourage more businesses in towns by basing the rates on the worst year. The smaller towns should be given some breathing space. I remember that a package of measures was introduced a few years ago which allowed up to five years remission from payment of rates or a staggered payment arrangement such as 20% in the first year and an increase in the rate over five years.

I recommend the Minister of State to consider measures for the hospitality sector. For example, if a new business or hotel had no competitor within 10 km, the business would be given a break of five years from payment of rates. This would likely apply in smaller towns in Roscommon such as Ballinlough or Strokestown. I see all these towns that are dying on their knees. We need to begin to think outside the box in trying to revive these smaller towns throughout the country.

This legislation will cripple the amount of money being raised. For example, throughout the country there are probably 110 or 115 quarries which have paid large sums in rates. They have been trying to survive and they have been willing to pay the rates. As a result of crazy types of paperwork, the minute they become compliant, they are told that they are not compliant and they are supposed to shut down. The do-gooders of this country are honing in and trying to tell county councils to write letters to all these quarries. If this happens, it will have a severe impact on Government spending on roads, on employment and on the level of rates collected. We need to get real about where we are going.

In respect of the construction of new roads, not necessarily motorways, or where roads are upgraded, the smaller towns on those routes need to be protected by the provision of a slip road into the towns. A filling station or places to eat on the side of the road will take business away from the small towns. To ensure the survival of these smaller towns, it will be necessary to provide incentives. The Lidls and Tescos of this world have built out of town, with the result that town centres are being decimated. In conjunction with councils, we should examine the area of parking charges and consider providing incentives, be it through rates or otherwise, to try to revive town centres.

On what is happening in rural areas, I was speaking recently to an auctioneer in Strokestown. A fabrication company was willing to take over a building that has been closed since 2009. The company took it for €10,000 per year and two weeks later it got the word that the rates would be €18,000. That factory was closed the following day and eight jobs were gone. We persist in burying our heads in the sand. I do not blame the councils because they have to get in as much money as possible. However, we need to devise a national strategy to revive these towns.

The rates bills for hotels sold in Roscommon, Leitrim and east Galway have been up to €40,000. I suggest that if a business provides employment, it should be given some credit with regard to rates. Every person taken off the live register means €15,000 to €20,000 of government money saved. However, if we intend to keep crippling businesses then those people will not be in employment. We must provide the incentives. I ask the Minister of State to consider some of those points.

I refer to the complex and technical measures used by the Valuation Office in producing the rateable valuation figures. The local authorities decide what funding they need for the year and then they work backwards and introduce a rate which will produce the money. This system is not ideal and it puts the local authority in a very difficult position. It is tough trying to run a business in Dublin which depends on the domestic economy but it is even more difficult in the countryside. It is a big problem if the local authority is compelled to be tough on small businesses to get the money to run its operations. It is not an ideal method for collecting that money.

In 2014 there was a vacancy rate in premises in Wexford of 13% as a result of the downturn. The percentage of rates collected was just over 69%. It is the case that money cannot be got because businesses are finding it too challenging to pay rates.

The growth of Tesco, Aldi and Lidl has put very great pressure on small shops. It is very difficult for a small shop in competition with the big supermarkets to be able to pay rates. When a council introduces its rate of valuation, it is not considering how a particular business is doing. Deputy Fleming suggested that it might be better to tie the rateable valuation to rent and there is some logic to that argument. The Minister of State may be able to highlight pitfalls in that suggestion of which I am not aware. I see so many places in the countryside in my county of Wexford, for example, where life is very difficult for businesses.

I have been speaking to the people who collect the rates in Wexford and they find it almost impossible to collect the rates from pubs. When the pubs were doing well a few years ago, many of them built big lounges because they knew they could fill them. Nowadays, they may only be using one third or a half of the premises but they are being rated on the entire premises. There is not a rateable valuation for half of a premises whereby the rate is only charged on the space being utilised. I suggest the Government should consider such a rate because it is a rational idea. If the owner makes the case that he is only using half of the premises, I do not think it is fair to ask him to pay for areas he is not using. Likewise, the same argument could be made for vacant units. In Wexford, for example, a vacant unit attracts 100% relief from rates but the rate is 50% in Dublin.

A couple of years ago I had a warehouse in which we could have played football. We bought it to knock down and build apartments, but while it was still standing we used it as a store. The rates on it were draconian as we paid 50% of what they would have been if it was being used for commercial purposes. It was a bit harsh.

A problem is coming down the tracks in places such as Wexford where urban councils are being done away with. The rate on valuation which has been fixed for 2015 by Wexford County Council is €71.52. New Ross is not a thriving town and life there is difficult for small and medium-sized businesses. The rate on valuation there is €55.47. Dragging these businesses up to a rate on valuation of €71.52, which will be done over a few years, will be very difficult for them and this should be considered. If business is weak in one town but very good in another town 20 km away, the same commercial rates should not be charged in both. Ability to pay is not factored into rates, but it is at the core of the issue. How to do it best is challenging, but I believe the idea of tying it to rent would come close.

We have had some problems with rates on properties and I was very curious as to how things were done in Dublin city. I went to the Valuation Office, where Patrick Kyne and Declan Lavelle work, and I was really impressed at how it does things. The staff there do their best with a very archaic system. They were very impressive. I could see they are trying to be as fair as they can. I spent approximately two hours there and we looked at all of the various streets in Dublin, which I know pretty well, and the different rates on different streets. One guideline the office has is to grade units from A to D, depending on how far they are from the footpath. Those graded A are most expensive because they have the most shop front.

We have a wine bar on Russell Street and it is almost all A graded, including the kitchen, which makes the rates very high. It does not take on board the fact we do not have tables in all of the area, whereas most restaurants place their tables as close as they can to the street front. People like to see their food being cooked, and it is good for a restaurant to be able to do this. We put the kitchen very close to the street with the tables around it. We are being punished because the kitchen is too close to the street. We are paying far too much in rates for kitchen space and storage.

It is very challenging for the Valuation Office to come up with a fair system that works fluidly across the board. We have just been revalued in Dublin and there has been debate about it. The rents on two of our units have reduced by approximately 30% but the rates on them have increased by approximately 35%. This does not make commercial sense. The rent reflects the value of the unit at the time and its earning capacity. If a unit can make a lot of money, the guy who owns the building will charge a bit more for it and it will be reflected in the rent. A decrease in rent also reflects the level of business going on at the particular time. The fact the rates are not connected to this is problematic. I am not so sure how this would be done without tying them directly to rent but it needs to be examined.

The Minister of State spoke about appeals and stated a more efficient appeals mechanism will be put in place, which is to be welcomed. Revaluations will take place every five to ten years. I would like to think they will be closer to every five years than every ten years because economies go up and down in cycles. I know valuations cost money but they should be done regularly. The rates on some of our units have been set but already I would like to appeal them. I do not know whether the Bill will let us back in the door to speak to the Valuation Office because of how recently the rates have been set. We feel the rates are fair on some of the units and we can see the logic behind the final figures, but we do not see the same logic behind the figures for other units. Perhaps the Bill will allow us to challenge some of them as it would make sense.

Earlier I mentioned the many vacant units in the country. When someone considers the prospect of renting a unit, the rates can be very challenging. I wonder whether consideration might be given to the idea of a rate-free period for vacant units, particularly in provincial towns and villages, to encourage people to move into them. There are so many empty units in Ireland at present that many of them will not be filled for a long time and some of them may not be filled again. It would be good if the Government were to introduce a measure to encourage people to take on these units and a rate-free period would certainly help.

This year, Wexford County Council intends to collect approximately €37 million. I know many people in small businesses in Wexford who do not think much fairness is applied to what they must pay. As long as the local authority needs the money to survive, it cannot go any easier on them. Last year, Wexford County Council wrote off €5 million which it knew it would never get. I am afraid if there is not more flexibility with some customers who are in difficult times they could be added to the list of vacant units. Most people would agree there has been a bit of a lift in the economy in the Dublin area.

I admit that in 2014 we saw larger numbers come through our doors, mostly through tourism, as there was an increase in that sector, particularly in the Dublin area, and that was good. Businesses in places such as Wexford are not getting the same boost and that is a major problem. I have not noticed in my lifetime as much of a divide as now exists between the countryside and Dublin. It is almost at a stage where Ireland is Dublin and the rest of the country is a long way behind. I point to the recovery in house prices in the Dublin area compared to Wexford. There has been no movement house prices in Wexford in recent years while there have been dramatic price increases of up to 25% in Dublin. That is a reflection of what is happening in the area. There is far more optimism around Dublin. We depend very much on foreign direct investment for much of the extra work that is coming our way. The days of telling the large foreign corporations that come into the country where to set up their businesses are probably gone. Most of them want to be within the Dublin orbit because it is far more attractive to them.

I firmly believe that some day a Government will put much more energy into developing indigenous industry. I am convinced that more can be done in that area. We do not do enough in it. The provinces will continue to struggle until we put far greater energy and investment into creating indigenous industry and helping people with start-ups. It goes back to the old chestnut of where do we get the money and there not being enough of it. We have had that discussion time and again with regard to different areas with different Departments. The fact that we can borrow money at 1.7%, or less sometimes, on the markets in order to do certain things but we are not allowed to do other things and are forced into the hands of the private sector, through public-private partnerships and other different arrangements, where money costs in the range of 15% is very unfortunate. If Europe is to function in the proper spirit of what it was designed to do, that is something that must be addressed. The State should be allowed to borrow money at 1.7% to invest in indigenous industry, infrastructure and in any area that it is needed without driving it into the hands of the private sector which makes a great deal of money out it. That was part of the Lisbon and Nice treaties and it created great opportunities for the private sector to make money through the State. That is holding back many things because we all know that if we had the opportunity to spend more money in these areas, there would be huge benefit all round and there would be a big flipside for everybody. It would have a domino effect and it would make a massive difference.

To return to the issue of rates, my main point is that I am inclined to agree with Deputy Fleming, namely, that tying rates to the rental factor would probably give us a fairer system.

The only other issue I wish to comment on is that of outsourcing. I was very impressed by the people I met in the Valuation Office and it is unfortunate that they cannot expand their resources to a degree where outsourcing would be unnecessary. If a Department can function well, I do not see the logic of that office outsourcing work in this way. If the office is going to carry out valuations on a regular basis and this is going to continue every five to ten years, there will be a good deal of work in that area. It would make sense to increase the resources in the Valuation Office rather than simply outsourcing the work.

The next speaker is Deputy Áine Collins who is sharing a timeslot with Deputies Eoghan Murphy, Seán Kyne and Patrick O'Donovan.

I welcome the opportunity to speak on this Bill which proposes to amend the existing valuation legislation. There is general agreement that the current system is cumbersome, outdated and inconsistent. Rural Deputies in this House are well aware of the huge decline that has taken place in business, in particular in rural towns and rural areas. Businesses have closed and there are vacant premises in all the towns and villages. While I acknowledge that rates are not the only reason for this, they are a contributing factor. With the older system of county and town councils, it was often the case that rates were higher in small towns and villages than in towns that had their own councils. The abolition of town councils would eventually solve this problem as equalisation would accrue over a seven-year period. However, this process could be too late for many of our smaller towns and villages as, without immediate and remedial action, it is doubtful there will be any rateable properties left in rural areas. Many villages are already without valuable post offices, shops, pubs, cafés etc. Section 11 of this Bill will provide a way of adjusting valuations in these instances which may help some of these businesses to survive. Generally the old system did not take account of the profitability of a business, nor did it allow for revaluation except when a new planning permission was sought.

Section 6 provides an amendment which allows the commissioner the option of appointing a person to carry out a valuation on behalf of the Valuation Office. Hopefully, this measure, combined with a self-assessment measure, will hurry up the process and lead to more realistic ways of achieving a just and transparent rate. This will allow new businesses to evaluate more accurately the cost base for rates in advance. This is important as many retail units are being divided into smaller, more manageable units and, under the current system, it is impossible to calculate properly what the rates would be.

This Bill comes from the Seanad and, judging from the transcripts, there was a very successful interaction between Members of the Seanad and the Minister of State, Deputy Harris. I would like in particular to compliment the Seanad and the Minister of State on their handling of amendment No. 24. It acknowledges that sporting or community organisations can rent out their facilities such as all-weather pitches or gyms to local groups without having to pay rates, but like other commercial enterprises any section such a pub, restaurant or catering facility within these premises is not exempt from rates.

Child care facilities were considered in detail by the Minister of State and the Seanad and an amendment in this respect was accepted. From now on, a charitable and not-for-profit organisation will be exempt from rates. While I believe that in the future we will have to look at exempting private, for-profit child care facilities, this amendment will now bring welcome relief to approximately 1,000 not-for-profit child care providers.

I welcome the Minister of State's constructive contribution to this debate and the amendments he accepted in the Seanad. I am confident that some future improvements can be made to this Bill as it goes through the various Stages in this House. In the meantime, I commend the Bill, together with the amendments made to it in the Seanad, to this House.

I welcome the opportunity to speak on this Bill. It has been coming through the Oireachtas for some time. Obviously the issue of commercial rates is one that is very familiar to anybody who has served on a local authority. As a former member of a local authority for eight years, I found it was a constant source of debate and was very topical in recent years.

The Bill modifies the existing system, but there is a valid argument for replacing it with a new system. The difficulty that arises is how we define and draw up a new system. We will always have people who will be winners and losers. People who would be for or against this would find a new system equally problematic and therein lies the problem. Many Members have called for a new system. It is clear that the current system is not properly equipped. Under the 2001 Bill, the last major legislation on this area, it was envisaged that there would a ten-year cycle of valuations, but ten years is a long time, as highlighted by Deputy Wallace.

The process started in 2005. Even during a period shorter than ten years, economies rise and fall and there are good times and bad times. A valuation could be made, the economy could plummet the following year, and by the time it rose again one could be in the next valuation period. In the meantime, a business could be significantly affected.

The current system has problems. Only three counties have started the process, and only two have completed it, I believe. When the process begins, some will benefit and others will lose, but I understand the overall amount collected in a county will remain the same.

I understand that while there are now 120 valuation staff in the office, there used to be 150. It is quite clear that there is a resourcing issue. Local authorities rely on commercial rates. The Government has broadened the tax base and introduced the local property tax as an alternative source of income. It is to be hoped that, over time, this will allow the burden on businesses to be alleviated.

The Bill has many positive measures. It will simplify the processes, remove the appeal to the commissioner and allow appeals to be dealt with by the valuation tribunal. However, it can only deal with a small number of hearings at any one time, which means it must be properly resourced.

Section 6 allows for the appointment of non-valuation office personnel to carry out valuations. It is to be hoped this will minimise delays, but we need to ensure there is consistency within the Valuation Office and across the country. Section 7 permits the publication of a new list of valuations before they come into effect. This will allow people the time to query them and submit appeals. Section 11 provides for the insertion of section 5A, which deals with self-assessment and simplifies the process of administration of valuations, rather than altering the system. Section 22 allows the commissioner to direct the manner in which the net annual value of relevant properties may be estimated.

Overall, I welcome the approach taken. However, as a former councillor I found the only power I had was to increase or reduce the annual rate of valuation, which is a function of councillors. The best international practice takes account of the net annual value or rental value of a property. Pubs, hotels and service stations are valued by reference to the trading data associated with property in that sector.

I am sure this is debated at local authority meetings up and down the country during budget time. We never had the power in law to reduce the net rate for small corner shops or businesses, as compared to large multiples. The attractiveness of being able to reduce rates meant that the larger companies, such as an energy provider which was the largest ratepayer in our county, did not ask for or need a rate reduction. If we had reduced rates for a small corner shop, they would also have been reduced for larger businesses.

Flexibility needs to be given at some stage. That is probably fraught with problems and difficulties, but such an approach is not available under the current law. The law needs to be addressed so that elected members can target benefits to smaller traders and retailers to give them a lifeline in times of recession.

I thank the Minister of State for bringing the Bill before the House. When we discuss commercial rates and local property tax, it is important that we also discuss where the money is going and how it being spent. People with businesses pay a lot of money on rates in Dublin city, and they often wonder where it goes. One initiative I have tried to pursue for the past number of years is tax transparency at a national level. We have a calculator up and running so that an individual can check how his or her income tax is spent by the Government. It is something we need to compel local authorities to do. If a business could quickly and cheaply get a breakdown online of where its rates are going and how they are spent by the local authority, there might be more buy-in from businesses into what councils are trying to do and the need to pay rates. Many business owners wonder - given the different charges they face, from waste collection to water charges, and the permits for which they pay - where the rates they pay on top of that go. Rates are an importance source of funding for local authorities, but we should tell businesses how it being spent. It is important to have buy-in for the charge.

There are a lot of very positive retail trends in the country. We have heard from Retail Ireland that there is expected growth in consumer spending of 2.7%. Retail sales in the last quarter of 2014 were the best since 2007, and Dublin has been voted the fifth best shopping city in the world by Condé Nast. That is all very positive, and if, as I think we have, we have managed to stabilise the economy, perhaps now is the time to consider how we rate businesses in this country and whether there is a better way. We need to examine whether the idea of a fixed charge that is static regardless of how the economy or business is performing is the best pro-enterprise way of making sure that businesses make a fair contribution to the running of the areas in which they are based. We need to ask if something more dynamic can be done. As Deputy Kyne said, we need to ask if we can introduce flexibility so that businesses that need a rate reduction during a particular time or for a particular reason could benefit, while not giving an unnecessary or unneeded benefit to larger businesses working in the area or industry. The Bill could provide such an opportunity.

We know from the new valuation process for rates how long it takes to design and implement a new system and the unforeseen delays which might be encountered. If a major change is proposed in, for example, ten years' time, now is the time to start discussing and planning for it. A new process was introduced in Dublin and it was difficult. I attended a number of meetings with local businesses and business associations which were worried. They were not getting clear information and were afraid that their bills would increase. We are still managing that process and there is still a lack of certainty for some businesses. Things could have been done better, but we need to learn from the process as it moves around the country.

Some of the exemptions in the Bill are very welcome. Many speakers have mentioned community sports clubs which have a bar, and the exemption from rates for other areas, which is important for clubs. They will be able to put the money they take in into the sporting ground, players, kit or equipment. It is recognised by the Minister of State and the Government that it was unfair for clubs to have to funnel money back into councils.

There is an exemption for non-profit nursing homes, which is welcome. There is no exemption for nursing homes which make a profit or are funded through the fair deal scheme. I wonder if we should reconsider that, because we have to do what we can to make health care costs as affordable as possible. We do not want to make it more difficult for people to pay for the health care needs they will have later in life.

A similar approach applies to child care facilities. It is welcome that not-for-profit child care facilities are exempt, but for-profit ones are not. Child care is very expensive and this may be a way to provide some relief for such businesses, which could then be passed on to the parents who send their children to such services. The fact that child care facilities are being charged for outdoor areas is interesting. In Ireland, 25% of children under three years of age are overweight. We do not want to disincentivise new or existing child care facilities from using their outdoor areas because they are worried it will cost them more money. We want the opposite; we want as much play and outdoor activity as possible, because that is best for children. It is something that we may be able to examine at a later stage. I welcome the Bill, which is important.

I welcome this important Bill and congratulate the Minister of State, Deputy Harris, on its introduction to the House. The Bill has been debated by many Deputies and local authorities throughout the country. I have a particular interest in certain aspects of the Bill.

I was pleased to see that a number of amendments dear to my heart were included by our colleagues in the Seanad. There are a number of aspects of the Bill which I welcome. This legislation will create a much fairer playing field for town centres and out-of-town retailers. Walking down the main street of Longford town, it would be clear to anyone that business is being affected by retail parks on the outskirts of town, excessive car parking charges and reduced consumer spending. Town centres have consistently suffered over recent years and a great deal of work needs to be done if they are to survive. For a number of years I have being calling on some form of Government strategy to be brought forward that would support business growth and job creation in our town centres.

We have the report from the commission for the economic development of rural areas, which was prepared by Mr. Pat Spillane and launched with great publicity by the Taoiseach in Castlebar last year. We need a decent allocation of funding to implement the recommendations of the report. I know that approximately €1 million was allocated in the 2015 budget for the establishment of a rural innovation development fund to support ideas on a pilot basis under this report. This legislation is a small step in that direction but we must do much more to bring town centres to a certain standard.

This Bill seeks to address the inequality that exists between town centres and out-of-town developments. Under the current system, commercial rates are not charged on the provision of out-of-town retail car parks. As a result of this, there is absolutely no incentive for retail parks to charge for these parking spaces. This legislation will seek to address this issue by applying a rate on the retailers. This rate is to be based on the revenue that would be generated by the space of the same parking charges in any nearby urban area. The benefit of this approach is clear, and local authorities will receive extra revenue while at the same time allowing large corporate retailers to make a contribution to the local economy. It is also a wise move to ensure that parking spaces for customers will be taken into account when valuing a shop or retail outlet. All of these provisions will work towards levelling the playing field between our town centres and the large out-of-town retail parks.

Another important aspect of this Bill involves sports clubs. We can all outline the valuable role sports clubs and sport play in our local communities and this Bill introduces a new exemption for community sports facilities. The first part of the exemption replicates the current interpretation of the "community hall" exemption. Essentially, if the sports club does not have a bar, all of its premises would be exempt from rates. The second part of the exemption is for sports clubs that have bar facilities. As it stands, if a sports club has a bar, all of its premises is valued for rates purposes, including buildings that are solely for a sporting use. This is very unfair and many sports clubs, particularly in rural Ireland, have been hit hard as a result. The amending Bill being put forward today will ensure that the parts of a sports club which generate income, such as the bar, will be liable for rates, and not the entire premises. This is a common-sense approach and it should have been implemented long ago.

Yesterday, I spoke in this House on the Private Members' motion regarding child care services and I am very pleased to see there is provision in this Bill to exempt premises used for non-profit early childhood care and education. However, I strongly feel that some exemption should be provided for privately run child care facilities, which amount to approximately 70% of the total number of facilities. If this is enacted, it will essentially mean that organisations that provide child care for charitable purposes will be exempt from rates. As the Minister of State, Deputy Harris, has pointed out, this amendment will exempt up to 1,000 charitable child care providers from liability for commercial rates.

This Bill is proportionate and necessary legislation. It improves the current standing of sports clubs, child care facilities and town centres, so I commend the Minister of State on his initiative and ability to steer this legislation through both Houses.

I welcome the chance to speak on the Bill. If we are to be honest, it could be renamed "the rearranging of deckchairs on the Titanic Bill". As a country, we must face the fact that our current rates system and this tax on businesses is wrong and utterly inefficient. It is a tax on enterprise and job creation for which nothing is repaid. It is a basic funding mechanism for local government, and it is time we faced the fact that we must come up with a new way of doing this. It should be less harsh with a focus on a society with the capacity to create jobs and wealth in the economy. The current system represents a modern form of highway robbery. It is the old way of people paying a bill, with dubious returns.

If a business is in a town or city centre, it would get street lights and cleaning in return, but we would really begin to run out of rope after that in the provision of services. The business must pay for water coming in and going out, as well as electricity and other services. If a business is in a business improvement district, it would pay rates and something extra for the district. These districts have seen some really good work throughout the country, but this is an extra charge on top of rates.

Deputy Eoghan Murphy made a very good point about how we bill for rates. A demand goes out for a bizarre amount, with no breakdown of the total or indication of how the money is allocated. For many local authorities, there is no way of saying where the money is going. It might be going to salaries and wages or services that may not be relevant or of benefit to the business community. It is an authority's only real source of funding, and it comes from the business community. The anti-enterprise focus of the rates system was best summed up to me in Roscommon last October when I met a business owner who had a business premises in Carrick-on-Shannon that was performing very well, employing ten people. He opened a second branch of the same business on the Roscommon side of Athlone. The first letter he got from Roscommon County Council was not a welcome or a "thank you" for creating six jobs and it did not outline what the Roscommon local enterprise office could do for him. It was not a request to meet the business owner. Instead, it was a rates bill for €6,500 and a request to pay within 30 days. It would have been too much for the letter to have "please" at the end and I am sure the recipient could not ask what the money was for. That constrained the entrepreneur's ability to create employment that might have taken somebody from the live register and given a person some sort of start.

As the phrase goes, we are where we are. We have a Bill, and in fairness to the Minister of State, there are some elements that must be welcomed. I welcome the sports club element, for example, which is important, and the element relating to child care centres, as we have discussed over the past two days. We must reconsider the whole revaluation process. It is a good idea in theory but it has struck fear into business communities throughout the country. It was drawn to my attention that in parts of Waterford city that had seen necessary regeneration from private enterprise, the first thing received by businesses was a revaluation, with rates having quadrupled in some cases. This happened because people took the initiative to reinvest in and upgrade premises, trying to make the city centre a better place to go.

There are places in the country that need that kind of initiative and investment, but when one considers the cost, one might be able to cover the upgrade but the additional expense of a rates revaluation - dead money - makes the concept uneven.

As a result, many people are turned off doing it. We must give flexibility to local authorities to enable them to encourage people, through rates incentives, to upgrade their buildings and businesses.

We must confront the fact that rates are a tax that will soon go out of fashion and will be unpayable. As businesses and people increasingly go online to make their purchases, they are often purchasing products from outside the jurisdiction from people who do not have to pay rates or, in many cases, VAT, although that is a separate discussion. They are buying the product at a cheaper price because the cost base of the online retailer is so much less, yet we still enforce this system for retailers who are struggling to keep the show on the road and who will not see what they are getting for it.

Deputy Bannon spoke about the need for town and area renewal. He is absolutely correct. One does not even have to leave this city to see town centres in parts of the suburbs that are dying, having once thrived, because people are going online to shop or going to the big shopping centres. While this Bill goes some way towards rebalancing the discrimination that exists against our traditional centres, it is far short of what is needed. What is required is a complete re-imagining of the way in which we tax business and fund local authorities. Our town centres must survive and thrive. They are essential elements of a modern society in terms of cohesion - a place for people to do business and to mix and gather. At present, in many town centres neither business owners nor local authorities have the resources to make the necessary investment. There must be a system of encouragement, through the rates and the local authorities, to allow investment to happen without the investors being penalised. When one makes an investment in one's premises, one is immediately penalised because it is upgraded in value, and the local authorities will pursue the person, as they must, with a bigger rates bill. That is not the way it should be done. We should encourage and reward upgrading and investment, rather than automatically penalising it. Perhaps the case should be made that those who leave their buildings in a derelict state, despite all the work under way by councils with derelict site regulations, should be penalised in their rates for the damage they are doing, rather than those who make the effort to upgrade their premises.

The issue of what businesses get for rates has not been clarified. There is never an effort on the part of the Department or local government to tell businesses exactly what they are funding or what work the local authority is doing. My local authority in Mayo, like many other local authorities, has an economic and investment unit. It does superb work. The unit is funded through rates, yet that connection is not made. If rates from a business in a rural area are funding street lighting, the lights might as well be on Mars because there is no public lighting in rural areas. There should be a direct contribution from rates to the upgrading of broadband services. A connection should be made between the rates income and road upgrades. There is no sense in telling businesses in a rural area that the rates go towards cleaning when the cleaning does not happen. Furthermore, under the new system of local government après the abolition of town councils, cleaning and road sweeping machines are becoming a much rarer sight in main towns that formerly had town councils. Previously, the council could show the ratepayer that their money was going on cleaning the streets. Now, one would be lucky to see a street cleaning machine twice or three times per quarter, due to the length and breadth of the new municipal areas that must be serviced. That is another service that has been diminished. Councils have funded, and are always good at, various tourism and business growth initiatives. That comes from rates, and that must be explained too.

The notion of sending a demand in the 21st century must be abolished. Councils have to realise that rates are a major source of expenditure for businesses, and businesses should be told what they are getting for every cent. In the amendments to be introduced by the Minister, perhaps a requirement could be applied to councils when they send out the demand - it is not even an invoice, but a demand - to provide a breakdown of where the money goes, what services were provided and how the council can assist the business. One must still almost beg the council to allow payment of the rates to be spread over 12 months. Payment plans vary from council to council and from office to office. Some type of flexibility must be provided for the payment of this major expense, just as one gets flexibility from utility companies in paying other big bills.

The other issue is the existing rate on a building that has been empty but that a new business wishes to occupy. It sums up how weak and out-of-date this legislation is. If one has a business idea, is lucky enough to get the finance together and finds a premises, one is hit immediately with a legacy debt on the building. This happens all over the country and particularly in the hotel sector, where small hotels have hit the wall in the last few years. Approaches might be made to try to get them operating again, but the people are hit by legacy utility and rates bills. In fairness to many of the utility companies, they will deal with the person about the bills, but the rates bill is the one that is dragging many new businesses down.

I realise there are areas of displacement and that there are challenges regarding competition and what other businesses can do, but we must have some type of culture whereby the State encourages somebody to set up a business and promises not to put blockages in the way. The current rates system is the major factor blocking many start-up businesses from getting up and running. The notion that one must pick up the local authority bill of somebody who previously had the building but has left it is wrong, and it is blocking movement on properties around the country.

I do not know how long the Minister will be in office but I expect he will be there for a while. This is a system that must be re-imagined. Somebody needs to lob a grenade into it, blow it up and rebuild it. It is a system that is anti-enterprise and anti-employment. It penalises those we depend on to pay the rates. Their input into how the system works is restricted, as is their input into how we change it, and much of it is never taken on board. If we are to have an enterprise-led culture and to be the best country in the world in which to do business by 2016, as the Taoiseach regularly tells us, this system must change. It is the biggest drag on small business in the country at present, and if we are to be the best country in the world in which to do business, we must get rid of the highway robbery that is our current rates system.

I am delighted to have the opportunity to speak on this important legislation regarding a matter that has been the focus of conversation in most of our towns, villages and cities for the last 20 years or more.

I agree with the issues raised by the last speakers regarding charities and sports clubs. The rates should be restricted to the commercial use and should not be extended beyond that.

Deputy Calleary raised the very interesting point of legacy debt. That is not legally enforceable. One cannot force somebody to pay the debt of a previous occupant. I realise some local authorities do that, but not all of them. It amounts to a scheming way of effectively preventing any enterprise from going into a vacant building.

Rates are the one issue that affects the commercial life of our towns and villages. They affect the hotel, pub, catering and administrative sectors. Everything that is likely to be located in the centre of a town or village is dramatically affected in a negative way by the level of rates, and the rates are automatically affected by the valuation system. How the valuation system applies in a particular area is totally random. It looks as though somebody has stuck a pin in a map and stated what level of commercial activity would be likely to take place in that area, and businesses are penalised because their commercially generated activity is not sufficient to fund it. It is a case of "Tough luck." I hope the Bill will take account of the need to balance the extent to which a particular enterprise is capable of raising revenue with somebody's desktop assessment of what that should be.

Like actual practice and tasting the soup, the proof of the pudding is in the eating. I have not had a chance to study this sufficiently, but I would suggest that after a period of six months or a year there would be a review to see the extent to which the enterprise in question is capable of surviving in a particular location, given its footfall and revenue-generating capacity. There is no other way to do it.

I apologise to economists all over the country and the world for what I am about to say. I have to apologise for this on a regular basis. However, if one were to assume the various contradictory opinions of the economists and apply them to the level of commercial activity likely to be generated in certain areas throughout the country, there would be many differing views. A means has to be found which will somehow level the playing pitch and enable an entrepreneur setting up in a town or village, giving employment and providing a useful service, to do so without fear of a major slice of his or her income being taken away in rates before getting started. A hotel - not the biggest one in the world - can expect to spend €300,000 to €400,000 in rates before the doors are opened at all. There is nothing unusual about this. The nearer to the capital city, the worse this gets. Some hotels and commercial premises in the regions are heavily penalised in the same way.

The need for variation needs to be incorporated into the system which determines the level of rates, but it needs to be refined. Some measure has to be taken. There used to be a rule of thumb on this where someone would tell a ratepayer that, on the basis of the size of the premises, it would, in theory, generate a certain amount of revenue a year. How in God's name could that happen? There is no way that anyone can do this, unless the ratepayer is cutting diamonds or something like this and it could be assumed there would be a certain high level of commercial activity. There is a huge variation in the degree to which revenue can be generated by various activities. In many cases it is necessary to locate enterprises in the centre of a town or village. If located in a remote rural area, they will not have the necessary footfall and will not survive. Some industries can survive in such circumstances but others cannot.

I have been around long enough to remember previous valuations. I always had a great deal of hope when a review of valuations took place, but, after the review, in some places things were worse than they had been. Some people had a massive increase in the rates burden as a result of the review. I do not know how the people concerned managed to come up with a valuation which could do such a thing. We still live in straitened times and, notwithstanding the recovery, there needs to be some degree of uniformity across the country, with checks and balances, in order to ensure the burden is within the capacity of the commercial operator.

Other speakers referred to the growth of multinational supermarkets and corporations and its killing of the centres of towns and villages across the country. This is a fact. The other thing which kills the centre of towns and villages, along with rates, is a lack of parking. When a person arrives in a town now the first thing he or she will recognise is that, if in a car, he or she is not welcome. The idea, presumably, is that a person would arrive by balloon or hang-glider and descend onto the middle of the main street of the town or village and hope that he or she will ascend into the heavens thereafter when wishing to leave. It does not work this way. We have to encourage the development of our towns and villages - there is more than one element to this - by giving a clear indication to shoppers and consumers that they are welcome. They should be invited in, treated well and provided with a parking space. I will not digress any further on that.

Incidentally, I have never understood modern carparks. I can never understand why someone does not put a commercial premises on top of them, such as a revolving restaurant, as is done in other countries. It appears not to be possible here. I cannot understand why there is this lack of flair.

Put some smoking areas up there.

It dramatically enhances the commercial value and activity of the property and brings people into the town or village.

That is why the smoking area is on the roof.

One could have a very elevated smoking area on the roof of the commercial premises on the top of the carpark.

For when the Deputy retires.

Then you guys drive them underground.

There is one other element which I need to bring to the attention of the House. I wish to emphasise the importance of the impact of rates. It would be a huge boost to the commercial activity in our towns and villages if, as a result of this review of the valuations, there was a reduction in rates. There is no use in having it any other way. There are competing demands affecting the commercial sector. If, as a result of this, there is an increase in rates, there will be two effects. It will demoralise people and it will negatively impact the sector.

There are other competing factors. We had upward only rent reviews in the commercial sector. Do Members remember this? Some genius thought up this some years ago. I have always believed them to be unconstitutional and that, if practised on a large scale, they would ultimately undermine the budget of the State, which they did. To my knowledge, they are illegal now. The practice, in general, has been hugely detrimental. If people are facing bills from rates and should they in the future face an upward only rent review, the income of the entrepreneur, householder, investor, shopkeeper or launderette will be controlled by factors outside of their control. It must be remembered that only a certain amount of activity can be generated within a particular space. This needs to be borne in mind when considering the measurement of the properties.

One of the oldest difficulties we have relates to planning permission and a change of use. Let us take, for instance, a pub. It is to be hoped that pubs will improve, but it must also be remembered that they have provided a social service to communities. One classic example is where the owners of a pub decide to put in a restaurant upstairs. Someone does a head count and bingo, up go the rates straight away. Whatever hope the owners have of operating on the basis of the existing commercial premises, out of which they were barely able to eke an existence, if they decide to be enterprising and to provide jobs for people in the locality, they are put down very quickly. There is an extra supercharge on the rates and this defeats them.

The biggest single deterrent in terms of commercial activity in our towns and villages brought to my attention over the past nine or ten years, but particularly during the economic crisis, is without a doubt the rating system and its impact on business and enterprise.

I am grateful for the opportunity to speak on the Valuation (Amendment) (No. 2) Bill. I, like many of my colleagues, welcome the debate. We all need to deal with valuation in the context of a modern and changing economic worry. Land and property must be managed in such a way that broader society does not suffer and people with small business who want to hire a few extra staff are not hammered by commercial rates. We need to wake up to these harsh realities.

I will come back to deal with these matters later in the legislative process.

I welcome the Valuation (Amendment) (No. 2) Bill 2012 in so far as it seeks to introduce a number of measures to speed up the valuation process. We have to deal with the changing situation. In addition, the Bill introduces a number of other changes that reflect the lessons learned over the past decade from the operation of the Valuation Act 2001. This debate is also about the current valuation system, the revaluation process and the implications of the changes that this Bill proposes to introduce. That is why it is important for us to get the broader debate right.

Over the years, a number of councils have had difficulties collecting commercial rates. According to the information available to us at the moment, which relates to 2010, the average amount collected in that year was 77.7% of the total due. This was down from 82.8% in 2009. I believe the county councils in Donegal, Waterford and Louth and the city councils in Galway and Limerick had the lowest collection rates. Between 61% and 65% of the total due was collected in those areas. Limerick County Council had the highest collection rate, with 90% of rates due collected in 2010. Many councils cited the poor economic conditions and the lack of access to credit for businesses as reasons for their low collection rates.

We all understand the commercial reality for many people, particularly during the bad few years when the economy was being hammered, situations were really getting out of control and businesses were under major pressure. We have to face the reality when it comes to commercial rates. If an entrepreneur with a small business who employs between eight and 14 people is deciding whether to take on an extra staff member, his or her decision might be influenced by the receipt of a huge commercial rates bill of €50,000 or €60,000. I just think that is something we have to look at seriously.

A number of concerns have been expressed about the Bill before the House. The first one I would like to focus on relates to outsourcing. The Bill proposes that the Commissioner of Valuation be empowered to contract out valuations with regard to the revaluation of all properties on a valuation list. Currently, the revaluation of a property on a valuation list is done by the commissioner's office under the guidance of the Commissioner of Valuation. Section 6 of this Bill would allow this work to be outsourced to a person outside the Valuation Office. My concerns are largely based on the reality of what is actually happening out there. The argument made from some people's point of view is that outsourcing the revaluation of all property on a valuation list could speed up the process and perhaps cost less. However, I would like the Minister and the Government to look closely at the many risks that would be involved in such a change. There are concerns about risks that might be associated with outsourcing, including loss of control; differences in motivation, goals and attitudes between the internal staff and the employees of outsource companies; the viability of service providers; the quality of services; a lack of expertise; and the hidden and uncertain costs. In addition, there are possible conflicts of interest. I ask the Minister to look at the situation to ensure a bit of common sense is applied when dealing with what is going on in the world today.

The Bill removes the right to appeal a valuation decision - a revaluation or a revision - to the Commissioner of Valuation. The current procedure involves an initial decision on the valuation of a property for rates purposes. Then there is a period of consultation with the owner or occupier on this decision before a final decision is made by the Valuation Office. The owner or occupier can then appeal this final valuation to the Commissioner of Valuation. If the owner or occupier is unhappy with the commissioner's decision, he or she can appeal that decision to the Valuation Tribunal. Such a decision can only be appealed to the High Court on a point of law. The Bill proposes that appeals to the Commissioner of Valuation be removed and all appeals be moved directly to the Valuation Tribunal. This is my third concern about the legislation.

I would like to return to a broader issue that I mentioned earlier. I refer to the connection between high commercial rates and the impact on small businesses in the SME sector. I could give examples of small businesses employing seven, eight or nine people that are being hammered by high commercial rates. The most recent figures that were released in this country show they are particularly high. We need this tranche of finances. It is important to note that commercial rates are generally expected to raise at least €1.46 billion in revenue for local authorities. This is approximately one third of the overall revenue.

Business groups - I am focusing particularly on small business groups - have been calling for the rating system to be reformed to allow valuations to vary with the economic circumstances of a firm. One downside of such a change is that it could undermine the system of valuation, which is based on valuations of property in the area on a specific date. It is important that we raise these issues because they are essential.

I would like to go back again to the Bill itself. It seeks to introduce a number of measures to speed up the revaluation process - for example, by allowing this work to be outsourced, allowing it to be completed by self-assessment, removing the route of appeal to the Commissioner of Valuation on a revaluation decision, modifying slightly the scope of the property to be revalued and allowing valuations to be determined by the use of general market data coupled with statistical techniques.

On 29 January last, I asked the Minister for the Environment, Community and Local Government if he would support the introduction of the small business rate relief scheme to assist small businesses in 2015. I got this idea after I heard about a proposal that was being made by a number of people I know who are directly involved in the sector. A small business rate relief scheme could be of assistance. The Government regularly claims to be all about jobs, jobs, jobs and the economy. I think this would help to kick-start things. In his response to me, the Minister said:

Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes in accordance with the details entered in the valuation lists prepared by the independent Commissioner of Valuation under the Valuation Act 2001. The levying and collection of rates are matters for each individual local authority. ... I would consider carefully any application received for a rate waiver scheme. In considering any such application, it has to be borne in mind that a waiver of rates for one class of ratepayer could unfairly impact on existing businesses in the area.

In fairness to the Minister, he went on to say he would "continue to keep commercial rates related issues under consideration". I think he needs to up his game by doing something to help the people out there who are suffering. Small businesses are coming under a great deal of pressure.

I would like to refer to a number of other changes that are being made in this legislation. It is proposed to increase the penalties for most offences under this legislation to class A fines of €5,000 from class C fines of €2,500. Interestingly enough, the fine for an ongoing breach upon summary conviction has been reduced from a daily class E fine of €500 to a daily fine of up to €300.

It is important that we look at some of the ideas and concerns that are raised in today's debate. I am glad to have had a chance to record my support for the small business sector in this State. We need to give it a leg up to ensure it can survive in the economy of the next couple of years.

I thank Deputy Finian McGrath for sharing his time with me. The issue of rates is and has always been a huge one for the vast array of small business people up and down the country. Rates were on land up to 1977. They were always paid. I suppose it was a retrograde step to take them off fully. Now we have moved on to a whole new situation of business. The boom drove the valuations that were put on businesses mad. Then we had the bust.

However, there has been no connection between the ability of small businesses to pay rates and their turnover. These must be linked in some way.

I am disappointed in the Bill because it does not get to the nub of the matter. Most people whom I know try their best, as do the county officials in the former South Tipperary County Council, which has been amalgamated into the county. Money is banked in Nenagh, but the north Tipperary county manager does a smash-and-grab and takes everything out of south Tipperary. However, that matter is not for today. People who are paying rates in Clonmel, Carrick-on-Suir, Cahir and the smaller villages are being charged for everything, but they are getting no services in return - not a morsel of salt in the frost or snow. There are no council staff on the ground to assist them in any way. Since they have also paid water rates for years, many of them cringe to see the furore over attempts to charge for water. In south County Tipperary, 97% of water rates were collected.

I thank the rent and rate collectors and, above all, the ratepayers who have paid for services for decades. However, many new businesses have had to pay development levies when applying for planning permission. Even though they pay water rates, they must pay for a water connection as well.

I thank the staff of the Valuation Office with whom I deal because they are understanding and helpful, but there are not enough of them and they have too much work to do. As such, I welcome the Bill's section on appointing external individuals to conduct revaluations under strict guidance. People should not have to wait and appeal. The process is expensive, cumbersome and too slow.

Section 2 provides for a new definition and for deletions, substitutions and extensions of existing definitions in the 2001 Act. The section redefines "rating authority" to provide for the revaluation of fisheries. The Bill's ethos is important, but we have not got it right. I am not saying I am an expert, good or bad, and we can look forward to a better economic climate than the one we are in, but people have been struggling and forking out significant amounts of money regardless of turnover or of the ability of self-employed people, including myself, to create jobs and a better environment for their communities through their taxes and the PRSI contributions they make for their employees. There must be some connectivity.

This Bill is timely, but I would prefer if it were not passed at all, and I will vote against it because it is not right in many respects. We should take more time to develop a better understanding. I am not being critical of the staff of the Bills Office or whoever drafts Bills, but I often wonder whether they understand the issues they are dealing with. Why not have a forum in which ratepayers can have an input into the Bill and the system?

I listened with interest to Deputy Wallace's comments on business rates in Dublin, including for his restaurant. He said that even its kitchen area is subject to a high rate because it is deemed a premium market space, being at the front so that customers can see where the food is cooked. Although vital business is being done there, one cannot make sales out of the kitchen. What is produced in the kitchen brings in all the sales, but the area cannot be used for seating.

In the towns that I represent in Tipperary, restaurants want to create a nice ambience for passers-by and get people to stop by putting tables and chairs on the footpaths, but there has been holy war with the council over it. Restaurants are levied straight away and the spaces are measured in square milli-inches. It is punitive and regressive, but the Bill does not address this matter either. Businesses should be encouraged to make their streets friendly for pedestrians so that people might sit and eat when we get the weather. We had a wonderful summer last year. So far, this winter has been good as well. It is lovely to see people sitting outside, eating food and talking with passers-by. A person I have dealt with received a letter from the area engineer or the like claiming that the person had broken the law. This matter should have been examined in the Bill.

Small and medium-sized enterprises, SMEs, are the economy's backbone. During Question Time this morning, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, talked about IDA Ireland and Enterprise Ireland attracting companies to small rural towns. They are not going to those towns because there is no proper connectivity in terms of broadband and so on. We depend on SMEs, the generators of wealth. People have ideas and they source support, which is difficult to do, set up and develop businesses, work all the hours God gives them and try to create jobs and, thereby, wealth and better communities. When their rates bills arrive, though, they are crucified. They cannot pay. I am not saying they will not pay anything, as they want to pay, but there must be a system of instalments. The councils work on that front as best they can, but they need support and a dig-out. A great deal more research should have been done in this amending legislation, given how vital it is.

Section 17 amends the grounds on which an appeal to the tribunal may be made and provides that reference must be made to comparable properties. Where no comparable property exists, the appellant is required to submit a valuation determined by reference to the valuation levels of other properties stated in the valuation list. That is all fine and dandy, but it is not as easy as it says on the tin. What if there is no comparable business? A constituent of mine who was assessed six months or a year ago is in negotiations with the Valuation Office seeking an appeal. He has no industry with which to compare. The nearest comparable business has a much lower valuation than he does. I am concerned by the seeming and deep unfairness of this.

I welcome the fact that the office will get more staff on strict conditions of employment relating to, for example, confidentiality and leaking information. If there are misdemeanours, staff can be dismissed or replaced by other private sector employees under the strict terms and conditions set out in the Bill.

I am disappointed that there was not a more exhaustive examination. I have spoken with the chambers of commerce and small business organisations and held a forum to speak with SMEs, which are at the pin of their collar paying these rates and levies but are getting no supports in return. They paid willingly when they were able, but turnover has vanished in many cases. Others who must leave a place unoccupied must first pay their rates and then use letters of advertisement from auctioneers, for example, to prove that it was unoccupied so that they can get that money back. This is a regressive and unfair system and should be examined in more detail.

At the outset, I pay tribute to the Valuation Office's Accounting Officer who for a period, while matters were being managed better, actually did the job without any cost to the State. He was extremely helpful in terms of understanding the workings of that office when he came before the Committee of Public Accounts. He has given great service to the State and extended that service by doing the work, as he did, without pay.

I welcome the introduction of the Bill. One has to go to the very end of it, however, to understand what it is setting out to do, which is to strengthen the numbers in the Valuation Office and provide appropriate IT structures for the work to be undertaken. In addition, there are various sections which essentially refer to the office itself and what the commissioner shall or shall not be able to do.

My main concern about the legislation is that it does not go far enough. It does not deal with the issues that are being faced today by businesses throughout the country. The cost of creating a job through the IDA runs to roughly €13,000, but at one time SMEs created close to 1 million jobs. They tailored all their costs, cut back where necessary and ensured that they were competitive. The one single cost they could not cut back on, however, concerned rates. Regardless of their turnover or the challenges they faced, particularly from 2007 onwards right up to today, they were unable to cut the cost of commercial rates.

It indicates that those involved in creating jobs in the SME sector - small businesses run by families or individuals, that are central to our economic recovery - were, by and large, ignored. They were not assisted either by central government or local government. That is a reflection of the State's attitude to collecting taxes, because this is a tax that has no bearing on turnover or one's ability to pay. It is simply a direct extraction of money from businesses into local authority coffers. I would like to see that situation being changed.

The activities of the Valuation Office in terms of the revaluation process have clearly shown that it would take decades to complete what is necessary throughout the country. The starting point is that regardless of what happens in a county, whether the rate on particular businesses goes up or down, the take from the process must be the same. The concern for bureaucracy in local government means that while the take in 2013 was €1.47 billion, it cannot be reduced in any significant way. Whatever is done, therefore, nothing will be done about that amount. All that is happening is that pieces are being shifted around the board. Those pieces represent businesses run by families or individuals who are under pressure to continue paying a rate that is above and beyond the demands that should be made on them.

Most of the newly constructed premises came about from 2007 onwards when massive construction took place. Rates applied to those buildings reflected the values of the properties at that time, as well as commercial activity and the ability of those within the business sector to pay. They are still paying the same level of rates. Unless local authorities understand what is going on in the SME sector, they will continue to pursue businesses for 100% of that rate.

Some local authorities have engaged with the business sector. They have reduced the rate on buildings by an amount equal to the space that is not being used. However, there is an argument for them to do even more because businesses are still unable to pay. It is not only about the space being used, therefore, but also about profits made and an ability to pay rates.

The subsequent occupier clause has been another area of contention over the years. Properties remained vacant because outstanding rates could not be sorted out, so the landlord owed the rates or was left with the rates bill after a tenant moved out. Those rates stayed in demand as far as the council was concerned and because of that legal issue, properties were neglected and not let. This shows a clear misunderstanding of the SME sector.

That needs to be said loud and clear because if we are to get any change, it must be based on a business's performance and ability to pay. Why should a local authority have within its power the ability to take €1.47 billion in 2013, yet have absolutely no intention of examining whether a company, be it run by a family or an individual, can pay those rates? It should be remembered that they are paying taxes as well as creating employment. This sector has been considered a soft touch for too long, so the rates system needs to be taken asunder and explored. It is essential to have a greater recognition of one's ability to pay.

Other aspects of rates are also a cause for concern. If one was lucky, in the course of better times, to build an extension to one's premises or refurbish it, as well as taking the risk to create employment or introduce new services, the first thing that happened after getting planning permission, having paid fees and all the other charges imposed by a local authority, was a rate assessment. A person who just trundled on in their business, doing little but having a turnover, paid a lower level of rates than an entrepreneur creating jobs. The latter was penalised by the taxation system through the commercial rates reassessment.

The biggest single issue in the country today, as outlined yesterday by my colleague, Deputy Troy, is the cost of child care and keeping crèches open to enable people to return to work. Sometimes they go back to work to service a mortgage. In most if not all cases, however, it is a question of servicing debt caused by mortgages or other obligations. The State should understand that servicing personal debt is causing difficulties within families who must pay large sums of money for child care. That issue could be dealt with by simply exempting all these educational centres from the payment of rates. Such action by the State would be recognised by that sector concerning the costs involved, which are borne by parents who are making a genuine effort.

The same could be said of sporting organisations. What does the Minister of State intend to do with a sporting centre, a club or licensed organisation that has become a community centre?

We have devastated rural areas by supporting policies which lead to the closure of local pubs, grocery stores and post offices. There is nothing left in some villages other than local GAA clubs, in the main, or other sports clubs. The clubs in question have availed of grants and made every effort to galvanise communities, particularly children, who represent the next generation, by providing some social activity that will assist in rebuilding structures within those communities. The general properties owned by such clubs should be exempt from rates. If there is a bar on the premises, perhaps there should be a special consideration in respect of it.

Those who will argue against everything I have said will do so on the basis that doing as I suggest would result in the State's tax take being reduced. We are asking that, in the context of commercial rates, the tax take should be reduced. Let us not be afraid to confront that particular matter. The tax take should be reduced on the basis that local business are being pushed to the wall as a result of the amount of tax they are obliged to pay. These businesses create and sustain jobs and they are often run by families whose members work way beyond what is required of them to keep local community enterprises in operation. They lie at the very heart of communities and they keep going to provide people with both hope and access to services. The position in Ireland has changed because many villages and towns have been devastated. I am of the view that commercial rates are part of the problem in this regard. They are not the only factor but they are certainly a great cause for concern, especially for local businesses.

Another issue to which I wish to refer is the local government audit. If savings were made in how local government is administered and if responsibility for deciding on commercial rates was really left with local authorities, then it would be possible for the authorities to stimulate local economies by being able to take the political decision to reduce the level of those rates. That would be a good development because it would return the power of valuation, regardless of whether this was on the basis of self-valuation, and the ability to strike rates to bodies of individuals elected by the people. Those bodies would then be in a position to deal directly with the demands of local economies. For many years, this House has discussed the reform that is necessary in local government. Let us amend the legislation before us and give local authorities the ability to make all of the changes that are necessary, including those relating to commercial rates. Most of what is proposed in respect of this matter is compiled by bureaucrats and put before local authorities as a done deal. Those authorities cannot then walk away from what is proposed. They must either accept or reject it.

How many groups were consulted in respect of the legislation before the House? How many business people, large or small, were asked to outline their views and indicate how they would change the legislation, especially to make it better, expand it or ensure that it might deal in more general terms with the question of commercial rates? It must be remembered that in addition to those rates, water charges are also being imposed by local authorities. The rate in respect of such charges is €3 per cubic metre of water in and water out. This means that everything is being pushed onto local businesses. Those who intend to support the legislation should ask about the number of inspections to which businesses are subjected at present. They are certainly liable to inspection by the Health and Safety Authority and the HSE. Depending on the type of activity in which they are involved, businesses can also be subject to many other inspections, including those by the Revenue and, dare I say it, the National Employment Rights Authority. That is what businesses are obliged to deal with and they object to it on the basis that they are not being consulted. They also object because it is they who pay the greatest amount of tax and who create jobs. Occasionally, some of those involved in SMEs do this by investing their own personal funds because all of the costs relating to the business are not covered by its income.

The difficulty is that there are those in this House who do not understand what I have just outlined. Regardless of how we appeal to the Government of the day, and I did so when my party was in power, there remains very little understanding of what is involved in creating and maintaining a small business. The Bill before us illustrates that this lack of understanding continues to obtain. Any reform introduced in this House is based on how much the State receives at present and the need to ensure that its take will not be reduced by the proposed reform. The issue is that the State is taking too much from businesses while simultaneously informing their owners that we are relying on them to rebuild the economy and create employment. There is a contradiction in the Bill which must be confronted. Will the Minister of State and the Cabinet confront that contradiction and discuss matters with those in the SME sector in the interests of coming up with something that is fairer, more equitable and based on people's ability to pay?

The amounts people are expected to pay in respect of leases and rates are phenomenal. Before those in government were elected, they gave a commitment to end upward-only rent reviews. No one in this House said anything when Bewley's, which was the subject of an upward-only rent arrangement, was obliged to close with the loss of more than 100 jobs. How long did it take to create that enterprise and how many millions did it take to maintain it? Bewley's is just one example of a business that was allowed to close. Some of the properties leased by Bewley's and companies like it are often owned by banks or pension funds and these are untouchable. I appeal to the Minister of State to reach out and touch them and to break the stranglehold of the upward-only rent review clause. Every other landlord in the country has been obliged to reduce rents to retain tenants. Some of them have been successful in this regard. Current practice in respect of tenants such as Bewley's and the many other companies to which reference has been made is to keep them in operation at the premises they lease and screw them for the highest amount of rent possible. Certain landlords are able to do this on the basis of leasing arrangements which are, quite frankly, immoral. The Government stated that it would take action on this matter and it is past time for it to intervene and resolve it, once and for all, before more of our high street enterprises are forced out of business. That is the eventuality we face.

Many businesses in urban areas throughout the country have been obliged to close as a result of the challenges with which they were presented. If one drives down the street in any village, town or city, one will find nothing but pubs, post offices and small shops that have been boarded up. We need to do something to reignite rural areas. This would partly involve an understanding on the part of local and central government that something needs to be done about rates, upward-only rent reviews and any other issue that confronts SMEs to encourage them to employ more and stay in business.

I welcome this debate because a great deal of sense is being spoken on all sides of the House. The debate really resonates with people connected to small businesses and rural towns in particular.

There are a number of issues that I would like to address, one of which is upward-only rent reviews, ironically. The previous speaker said that something needs to be done, the most infamous words of this House. I would prefer to have a couple of proposals and, to that end, I am going to make a couple of recommendations, which I hope the civil servants will try to take on board.

I agree with the concept of taking ability to pay into account. Three factors arise in this regard. First, one could consider the percentage of turnover of a business. Second, one could consider its number of employees and, third, one could examine its profitability or liquid assets. In this regard, big businesses have the capacity to make far higher profits than SMEs which do not have the core competencies they are competing with in locations such as shopping centres, in particular.

I admit to being a ratepayer and having a business in a shopping centre, but I wear a neutral hat regarding this matter. I prefer to see SMEs developing and also getting into a position in which landlords and tenants have a relationship that promotes the occupation of empty buildings in every town, village and city. There ought to be a perspective on how a building contributes aesthetically to the well-being of its entire neighbourhood. Unfortunately, there are at present many dormant buildings that are not being used; their landlords are sitting on them. Some landlords with three or four shops in a town might have one vacant but will not rent it until they get the market rent. Therefore, they are in some control over what they seek to achieve.

Many cities throughout Europe require the payment of rates on buildings that are not being used. The rate is less than for used buildings but the owner must pay a contribution towards the well-being of the entire area and is compelled to maintain the building aesthetically, at a level higher than obtains currently in our local authority areas, where there are buildings dragging down the aesthetic standard. This is a good model on many fronts and it could be used against a charge on the property in the event that it is eventually sold on or somebody does not currently have the capacity to do something with it. It recognises the fact that many small and medium-sized businesses are not in a position to enter into leases or take on the rates with immediate effect. If there were a lowering of the rates and the overall rent applicable, since the supply would increase dramatically, businesses and business opportunities would become more viable.

Let me develop another couple of ideas. There are many places throughout the country with redundant buildings that are outdated, yet the banks are not in a position to put finance in place for people to convert them into turnkey operations that would attract businesses. We are now launching - thanks be to God - the rural regeneration programme and the Action Plan for Jobs. There was a welcome announcement in my home town, Tralee, during the week. An advanced manufacturing facility is being put in place there. Until now, we were told continually by IDA Ireland that we did not have suitable properties to attract people to the area. We need to go a step further in this regard, specifically by focusing on private landlords who own lands. In the event that we could incentivise private landlords to restore their buildings to an attractive standard, could we consider off-setting some of the costs against the rates applicable to those buildings for a certain period? In the first instance, this would attract more foreign direct investment and, second, it would afford people the opportunity to commence a business without significant capital expenditure. It would allow turnkey operations, thus increasing the financial viability of the town. It would create jobs, including in reconstruction, and kick-start the entire area.

I welcome some very salient provisions in the legislation. Child care operations being provided for the State will not be subject to rates. We need to do more in the private sector in this regard. We talk about the generation that has most felt the downturn, and we have taken steps in this regard through mortgage interest relief, but this generation is having children at present and those children are entering the child care system. Child care needs to be more affordable. While this can be achieved through social protection, the instrument in question is a very simple one as it means child care can be provided if the rates are less and that the overall cost to the individual of procuring the service can come down. I acknowledge that it is only a little piece of the jigsaw for child care. I encourage the Minister to examine the private sector in addition to the public sector.

The attractiveness of towns and the tourism aspect are important. Some Deputies said that, during a fine summer, owners of restaurants and public houses want to put chairs and tables outside. There needs to be collaboration between the Valuation Office and local authorities. There needs to be flexibility to prevent people from overstepping the mark and obstructing business people from carrying on as normal. All concerned should work in a tasteful and meaningful manner that promotes business and makes a place look better. Chambers of commerce and chambers of alliance have a role to play in this regard. We are probably reaching a point in our history at which we are integrating all services in a better fashion. I encourage this. A top-down approach would be a better one.

There is a fairer and better form of flexibility provided for in this Bill. Shopping centres will now be subject to a rate that recognises that the free car parking they provide to their customers will be linked intrinsically to the valuation of car parking for which the public must pay in adjacent neighbourhoods. This will increase rates and the cost will be pushed onto the businesses. As a business owner, I have no problem with that because it actually means people will be on a more level playing field. It is very good.

A lot more needs to be done to promote businesses, but I acknowledge this legislation is a start. With regard to the speed at which we can proceed, some recommendations involving the Valuation Office could take ten or 15 years to address. Overall, small businesses need a break and need to be promoted. Buildings that are redundant need to be put back into the system, forcibly and not just when there is a demand on them.

The French model is the one I have been researching most of all. When one walks through an area in France on a Sunday afternoon, one notices that the shopping centres are compelled to close at that time. People go towards the town centres. It is a family day out and there is no obsession with the shopping ethos. There is a vibrancy in the older-generation areas and this results in a boutique feel, a cultural feel and a uniqueness that needs to be examined and promoted.

It is not just a question of saying something needs to be done, because we must generate ideas. That is what this place is about. I am just conveying some of my thoughts and welcoming some developments that have taken place heretofore. Overall, this is a great debate because Members have ideas and are conveying them. Perhaps another Private Members’ Bill could come before the House to develop this further.

I welcome the opportunity to contribute to this extremely important debate, which goes to the very core of supporting small businesses, particularly those in the retail sector. It deals with a very important component of our economy that has not in recent years received the attention it warrants. This Bill was published in August 2012, yet we are only discussing it in the Dáil two and a half years later. Granted, it has been through the Seanad.

Effectively we are talking about a business tax, because that is what commercial rates comprise. We must ask ourselves whether the system is equitable and whether the new Bill we are talking about will bring about more fairness. I do not believe it will.

Basically, this Bill tinkers with existing legislation that is based on something back in the 19th century. It is utterly archaic.

Before I get into a negative rant, I acknowledge the positives.

One cannot premeditate a rant.

I acknowledge the positive job creation measures on which the Government has embarked, particularly the work of IDA Ireland on foreign direct investment, for which it is to be congratulated. My colleague, the previous speaker, Deputy McGuinness, talks about how each IDA Ireland job costs in the region of €13,000 to bring about. Such investment is welcome and we need those jobs. The main focus of Government has been on that particular sector of the economy in the past number of years and we need to not ignore it, but certainly look at this area with a greater sense of urgency. While it is not relevant to this Bill, when we talk about IDA Ireland job creation I welcome the investment announced yesterday but question who identified what towns.

I identified Tralee.

It did not escape my attention that they were towns which had serious political players in situ.

I thank Deputy Troy.

I hope that it is not done on political interference. Certainly, that is not the way we should look at significant investment. It should be done based on regional development and strategic importance.

Returning to the Bill, I admire Deputy Spring. He and previous generations of his family did the State much service, but it worried me to hear a Government Deputy state he hopes the civil servants take on board what he listed. I remind the Deputies on the other side of the House that the people of Ireland gave them the honour and distinction of being elected to office in 2011 and they are the ones who dictate legislation. If the Deputy or any of his colleagues in this House feels there are inadequacies, deficiencies, anomalies or whatever, or if this Bill falls short, this is only the Second Stage reading. We must go through the process. I encourage them to put down the necessary amendments. They have the power and the numbers to ensure that any amendments they see fit can be passed and adopted. We should not be talking about bringing in Private Members' Bills at a later stage because, historically, the proof of the pudding has been in the eating. In the past four years, any Private Members' Bills that have come forward, be it at Private Members' time or Friday morning sittings, have not been implemented. Here we have legislation that is not going far-----

If I may clarify something, it was because the Minister of State, Deputy Harris, was not here at the time.

Then I hope Deputy Spring will follow it up with amendments and that the Government will take them on board because, in fairness, many of his suggestions were valid.

This debate is about listening to all sides of the House to see how we can improve this Bill. While I acknowledge what has been done in the area of foreign direct investment by IDA Ireland, that is not being done to support the SMEs in Ireland today. In the past number of years, the SME sector has been put to the pin of its collar and when one looks at the major costs associated with doing business, rates are the third biggest cost after labour and rent. If we look at what this Government has done on labour and rent, it has contributed to that.

The Government parties, in advance of the last general election, got significant support from the retail sector. They took out major advertising on Grafton Street and on many of the media associated with business, stating they would abolish upward-only rent reviews. That was a firm commitment. I understand the person who gave them the legal advice to say it was legally possible to do is the same person who is giving legal advice now having secured a seat around the Cabinet table to say it is not possible to do, and that is wrong. It was wrong to make a promise like that in advance of the election.

If one looks at the second cost, the cost of labour, the changes that the Government made to increase employers' PRSI has also contributed to the cost of doing business in this country.

If we look at the town centres - the Minister of State will forgive me for being parochial in looking at Mullingar, Athlone and Longford - some are doing better than others. In walking up and down any of our towns one sees a trend, unfortunately not exclusive to my constituency as it is the same the length and breadth of this country, of businesses closing and retail units lying vacant. Some areas are better than others. Thankfully, in Mullingar there are not too many vacant units at present, but the businesses there are put to the pin of their collar. Twelve months ago, I held a meeting on revitalising the retail sector in Mullingar. Over 100 businesses came to see what they could do better to revitalise their business because they want to help themselves and one of the main issues they felt was having a negative impact was commercial rates.

The Bill will quite simply tinker around the edges. I firmly believe we should be looking at abolishing the current system and start from scratch. The Minister of State, Deputy Harris, is a Minister I respect. He is an able person. Nowhere was that more evident than on Monday night, and I congratulate him for that.

Let us be real. Let us see what we can do to support these people. The town of Longford is on its knees. There is a meeting tonight in Longford about what we can do to support businesses. With the current format, there is no way that we can do anything. If the members on each of the local authorities want to give a rate reduction, it is of no benefit to the majority of independent traders in the town because a 2% or 3% reduction is only small money.

What is Deputy Troy suggesting?

The suggestion is to abolish it, start afresh and make it based on profitability. At the end of the day, it is a tax on business. Why should a business pay the exact same commercial rates today as it was paying ten years ago when it was doing much better? For example, a shop in Mullingar that was connected to the construction sector and needed a large floor area to display large bulky goods, had in excess of 60 employed in the good times. A number of years ago, it was down to six employees and the rates stayed the same. That is wrong. My suggestion, basically, is to attach it to profitability so businesses can afford to pay.

When one looks back at the length of time it has taken to revalue a property, the Valuation Act came in in 2001 and the process did not start until 2005, which was ridiculous. It should never have been allowed happen. Be that as it may, it happened. It has taken nine years to revalue one third of the properties. By that calculation, even with additional staff coming on board, realistically we could be looking at 2030 by the time all properties are revalued. It should not be the case. Why is there not self-assessment? We introduced the local property tax and everybody can self-assess their own property.

If one does not do it in accordance with the regulations and guidelines then a penalty could be applied. Does that not make more sense? As my colleague, Deputy Sean Fleming, said, quite often the people who are in business might be better able to assess their commercial business as opposed to older people who do not have the confidence to do it in regard to the local property tax. I am sure every Member across the House has people coming to their clinics every week or month because they are unsure of the value to put on their house or whether they can pay the tax online or in the post office. We help them out. Anyone in business is well able to do that for themselves. The introduction of self-assessment would help to reduce administrative costs.

I wish to refer to two other areas as I am conscious my time is running out, one of which relates to GAA clubs. I welcome the amendment made in the Seanad in that regard. A Fianna Fáil local election candidate originally brought the matter to attention and published a Bill on it. To be fair to the Government, it took the measure on board, which I welcome. It is good that the Government acknowledges good ideas come from all sides of the House, and not just from the Cabinet table but from backbenchers and the Opposition benches.

I also refer to crèches. I tabled a Private Members’ motion which was discussed last night and the previous night on the affordability of child care. Child care costs are crippling working people at the moment. The State contributes to some of the costs associated with running a crèche. To be fair, I acknowledge that it is not just the Government but previous Governments also. A memo was sent by a crèche in my constituency which set out the rationale for the 11% increase it intended to introduce from 1 February. The reason it increased its charges included commercial rates, water rates, a reduction in the capitation grant, employers' PRSI and staff training. Four out of the five categories of cost were levied by the State.

Deputy Spring made a good suggestion. I accept community child care services are exempt but they comprise only one third of the 4,300 child care facilities in the country at the moment. To be fair, every service is providing something the State has failed to do, namely, early childhood care and education. The main contract with every service is with the State, whether it is to provide the free preschool year or the other schemes that are applicable. The Minister of State must go further. He must look in particular at the facilities that provide the free preschool year. At a minimum, the room or facility should be exempt because only then can one consider helping to reduce the costs.

Yes, but it is not free to the people who provide the service. They still have to hire staff and light the facility. It is contributing to the overall costs. The Minister of State must ensure that a condition of any further exemption in the area of child care, which are educational facilities in the very same way that schools are, would be that any reduction would be passed on to parents and could not be swallowed up by the service provider.

A submission was made to me by Chambers Ireland. We are all aware of the organisation which has been to the fore in representing the views of its members in conjunction with Retail Excellence Ireland. It has a number of concerns on the Bill. Section 2 addresses the definition of “material change of circumstances” as set out in section 3 of the 2001 Act, but it fails to recognise the single greatest change in the circumstances of most businesses, namely, its profitability in the context of contemporary economic conditions. That is the key. If the way the rate is calculated were to be changed, that would not be an issue.

No consideration was given to the concerns of the business community on section 49 of the 2001 Act. No regard was taken of the fall in profitability of a business or a drop in the retail value of the property. There must be a change in emphasis from business being valued on its reserve output to being valued on the actual output. One example of that phenomenon is quarries. Despite holding considerable reserves, they have seen a dramatic decrease in their output and, subsequently, their profits due to the collapse of the construction sector.

I do not believe the Bill goes far enough. Provincial towns are suffering badly. Rural villages are dead. Post offices and pubs are closing. In many places, the viability of small community schools is under threat. The Bill will not do anything for schools but what it can do if we are serious about supporting small towns and villages is that we can ensure that all the proposed amendments are taken on board. As it stands, the Bill is not fit for purpose and that is the reason Fianna Fáil will vote against its Second Reading.

I hope I have more than the one minute and 34 seconds displayed on the monitor although I do not have a major contribution to make. However, I feel I should respond to a few points that have been made by some of the previous Opposition speakers.

I welcome the opportunity to speak on the Bill and most of its provisions. The previous speaker, Deputy Troy, prefaced his comments by saying the Government had done good things in terms of unemployment. He then proceeded to get into a rant, which he said he would not do, about the level of unemployment in the country. It is a bit rich for someone who was elected to the Chamber on the back of Fianna Fáil increasing unemployment to almost 16% to lecture the Government which is responsible this year for a decrease in the unemployment rate to below 10%. It is still far too high but more than 100,000 additional people are in employment in the four years since the Government came to office. That is, arguably, the most significant achievement of the Government. The reduction was much faster than most of the economic commentators and economists predicted. In fairness, great credit is due to the Minister for Jobs, Enterprise and Innovation, Deputy Bruton. The latest provisions of the Action Plan for Jobs were announced this week which led to a series of actions by the Government. This week’s focus was very much on the regions. I partly acknowledge and agree with what Deputy Troy said about unemployment levels not decreasing at the same rate in some regions. However, the recent figures for the regions generally are impressive. There was a 19% reduction in the unemployment rate in County Kilkenny in the past four years. The reduction in the unemployment rate in County Carlow was 14%. They are the two component parts of my constituency if I am allowed to be parochial for a moment.

Deputy Troy is about the same age as me and none of the Members present was around for the famous election campaign in 1977 bar you, a Leas-Cheann Comhairle, and perhaps Deputy Sean Fleming in another place.

For a Fianna Fáil representative to call for the abolition of rates harks back to perhaps the worst excesses-----

I did not. The Deputy should be fair.

He asked for the complete abolition of the system. I do not have the record. He said it needed to be abolished and used the word "abolish" three or four times. I know he was referring to commercial rates.

And replace it with a fairer tax.

I urge him to look at the record himself.

The Deputy is taking it out of context.

He asked several times for the abolition of commercial rates and said they should be based on a fairer system. Perhaps he is correct, but he did ask for their abolition none the less. He stressed the fact that too much emphasis was being put on IDA-related employment by the Government and bemoaned the fact that it cost €13,000 to create an IDA-supported job. A job is a job, and whether it is created by a foreign company or domestically, it is welcome. However, the figures tell a different story. The vast majority of jobs created here in this economy in the past four years have not been created by foreign direct investment companies or IDA-supported companies but by Irish companies. I agree with his request that more emphasis be placed on regional development. I think everybody would agree with that particular request.

I welcome the introduction of the Bill. I was struck by Deputy Robert Troy's initial comment. He said he could not support it, having posed the question of whether the rates system could be more fair and equitable. One could criticise the Bill for many reasons, but it will make the rates system more fair and more equitable. It may not make it fair enough and equitable enough but it is an improvement on the existing system. I loved studying economics during my time in college. One of the basic tenets of a taxation system is that it be fair and equitable. The main provisions of the Bill are about making it easier to gather information and streamlining the appeals process. That is welcome, and it makes the system more fair and equitable.

I welcome particularly the exemption for not-for-profit child care facilities. Like Deputy Robert Troy, I receive many communications from facilities in my constituency wishing to have that provision included. I welcome also the exemption from rates for sports facilities. We have all been extensively lobbied by community sports bodies in our constituencies. That the provision is included makes sense. Charges for rates should never have been levelled on non-commercial activities.

My county colleague Deputy John McGuinness, who contributed earlier, said the Bill did not go far enough. He said that those who argued against him would say that taxation rates should be higher. Far from it; those who argue against him agree that a level playing field, if members will pardon the pun, exists between sports clubs that provide bar facilities and the neighbouring family-run pub. He made the ludicrous proposal on the floor of the House earlier that a sports club should be charged a lower rate for its commercial bar than the family-run pub down the road in the same village. I did not think I would ever hear such nonsense in the House. I agreed with the overwhelming majority of what he said with regard to support for small business, but his proposal that a family-run business should be placed at a disadvantage vis-à-vis a sports club by allowing the club to pay a lower rate on its commercial activities beggars belief. Perhaps he will be in a position to clarify that at a later stage.

I wish to make one proposal to the Minister of State. It goes back to what Deputy Arthur Spring said and, in fairness, Deputy Robert Troy touched on it as well. I think there is an overwhelming case to be made in provincial Ireland for a provision for a holiday on commercial rates for premises that have reopened after being closed for six or 12 months, where a new business is starting. Obviously, this would have to be closely policed; it would have to be a new business getting on its feet and not a company moving for the sake of getting a rates holiday. Everybody I have heard speak on the legislation so far has mentioned the number of vacant premises. Some towns across the country are worse than others. We are fortunate enough in Kilkenny city. While there are a significant number of vacant premises in some parts of the town, the main thoroughfares are still fairly well occupied, although other parts of the country are devastated. A national initiative - it should not be left to local authorities - providing some type of a break for new businesses starting in premises that have been closed for six or 12 months should be considered.

I firmly believe - and always have - that the best way to help the country's economic growth to continue is to reduce taxes on income. I welcome the fact that in a recent announcement on national radio, the Taoiseach reaffirmed his position in that regard, in marked contrast to the Leader of the Opposition, who recently said, on RTE's "This Week", that he did not support a reduction in the universal social charge or in income but rather increased spending. Has Fianna Fáil learned nothing from its 14-year roller-coaster ride which brought the country to a very high point and then brought it to the depths of economic depression in recent years? He believes that taxes on people who are working should remain at their present level while we return to ramping up expenditure. There has to be a balance. There are certain sectors, such as health and education, where cutbacks have been so severe that there is a strong case to be made for increasing expenditure. I firmly believe that the top rate of income tax - in addition to the universal social charge, which means people are paying 50% to 52% of their income in tax - is penal. The Government's priority should be to reduce that significantly if it has sufficient funds. I believe it has to be done in a fair and equitable manner, linked directly to growth levels in the economy. I would encourage the Government to specifically put that into legislation so that if, in the future, Fianna Fáil and its friends end up back in Government, it cannot do the same wrecking act that it managed to do twice in my lifetime and, arguably, three or four times in the history of the State.

I welcome the main provisions of the Bill. I ask that some consideration be given to the proposal for a rates holiday, not only for provincial Ireland but any part of the country where premises have been closed for up to 12 months and where new businesses wish to open. This legislation might be right place for such a provision.

I thank Deputies on all sides for what has been a very constructive debate. A number of common themes have emerged. It is important to say, in the interests of honesty and bluntness, that not all the issues raised today can be resolved by a valuation Bill. This is a valuation Bill; it is not a magic wand. I acknowledged in my opening contribution that we had a really good engagement in the Seanad. I am not afraid to say that some very good ideas came from the Opposition. I engaged extensively with Senator Thomas Byrne and he engaged with my officials. We had discussions with the Irish Hotels Federation, the Society of Chartered Surveyors, the Sinn Féin Party and the Independents, and had a very good debate in the Seanad. As a result of that, the Bill I am bringing before the House is a substantially better Bill than when it was published. Deputies who say it has taken a long time to get to this point are right.

However, they must acknowledge it is the first national revaluation programme in 150 years. If one is blaming this Government for taking two years to get to this point with a better Bill than first published, one needs to put it in perspective. As a result of the Bill going through the Seanad we have a better scenario for sports clubs and child care, and I will deal with those for profit in a moment, and a better scenario for addressing the concerns of a number of industry bodies.

Unfortunately, I was not in the House for Deputy Spring's contribution but I heard some of it. He and others raised issues which go beyond the Bill, and as a constituency Deputy I certainly see merit in many of the points raised with regard to how to fund local government, where we go, what is the next step and whether we can further modernise the system of rates, but all of these issues cannot be answered in the Valuation (Amendment) (No. 2) Bill 2012. Its job is to modernise the valuation system and give people an opportunity to have, as quickly as possible in an expeditious manner, a fair valuation system and uniformity throughout society and counties.

I noted some comments that the Government only cares for foreign direct investment, and while it is very important and often used as an abstract concept, it employs 150,000 people in the country. The international financial services sector has 35,000 jobs, 10,000 of which are outside of Dublin. Foreign direct investment is important and I know Deputies opposite appreciate this. Two thirds of the new jobs created last year were created by small and medium enterprises. We have more to do for small and medium enterprises, but if one looks at the establishment of the local enterprise offices, which have acted as one-stop shops, JobsPlus, which incentivises through cash the creation of new jobs in communities, and the regional enterprise strategy announced yesterday, one can see a significant pool of supports, but we need to continue to engage on this.

The Bill before us today is quite technical and often complex, as valuation law tends to be. Its core objective is, however, simple. It is to accelerate the revaluation process. I have outlined the measures in the Bill which will help to achieve this acceleration, which are outsourcing, occupier-assisted valuation, the use of computer-aided techniques and aggregated data and the streamlining of the appeals process. The Bill does not make fundamental changes to the valuation or rating systems and, as I outlined, it is not intended to do so.

Rates are based on the rental values of property and provide an important and stable source of revenue for local authorities and predictable liabilities for ratepayers. The system must be fair and equitable. Changes made in the Bill make more explicit and transparent the criteria to be considered in determining valuations. While this legislative change is important for the understanding and smooth functioning of the system, it is the completion of the national revaluation programme which translates the theory into practice. To look at some of the areas already completed, so there is no sense of scaremongering, in Limerick 65% of ratepayers saw a reduced rates liability, 32% an increased rates liability and 4% were not previously rated. In Waterford, 65% of people saw a reduced rates liability, 32% an increased rates liability and 2% were not previously rated. People do not have anything to fear from this process. It is about revaluing as quickly as possible so there is fairness and stability in the system.

As I have outlined, this will be the first full national revaluation programme in more than 150 years and, crucially, it will put rating authorities on a regular five to ten year revaluation cycle. I agree with the Deputies who stated they would rather see it closer to five years than ten years. This must be the aspiration. This ongoing five to ten year revaluation cycle will represent a radical change for the valuation and rating systems. It will mean valuations and rates are much more relevant to modern realities and it will mean the system is seen in a different and, I dare say, fairer light.

I do not agree fully with Deputy Fleming's contention that the rates system is not fit for purpose. I have looked at this extensively in recent months as, I am sure, has the Deputy. I heard Deputy Troy, and I accept he wants to replace the rates system with something else, but when one examines what to replace it with one sees it is quite a complex question and it is not as easy as it seems. I am sure we will engage on this on Committee Stage. The system we have in this country, with minor variations, is operational in England, Wales, Scotland, Northern Ireland, Canada, Australia and elsewhere. The key point is that it is based on the occupation of the property and what a hypothetical tenant would be prepared to pay to rent the property. The unfairness is in the slowness of getting to the point of revaluation, and the fact one could end up paying a rate based on a valuation which is out of date because, as Deputy Fleming correctly stated, it takes too long to revalue.

Deputy Fleming made reference to other forms of taxation where business performance is specifically taken into account. This is because these modes of taxation are fundamentally different from commercial rates. In listing these taxes, the Deputy omitted reference to stamp duty, which is a transactional tax based on the value of a property and which is calculated without reference to how a business may be performing or what background debt the vendor may carry. Likewise, the valuations for commercial rate purposes are based on observing the market and assessing what the property might command on the open rental market at a particular point in time.

In its 2009 report, the Commission on Taxation considered the importance of commercial rates to local authority funding. The report stated: "We believe the current system of raising local authority finance from commercial rates works reasonably well, despite an outdated basis for valuing commercial properties." The last part is what we need to try to fix and have a more efficient, modern and fit for purpose system. The report recommended:

The revaluation initiative should be expedited to ensure that a transparent nationwide valuation system, including a cost-effective route of appeal, is in place as soon as possible. Regular revaluations should be carried out thereafter, in order to ensure that the valuation base remains up-to-date. This should be done as provided for in legislation, at intervals of not more than 10 years.

The express purpose of the Bill is to give effect to the issues set out in the 2009 report.

Deputy Fleming also made reference to the online services available to taxpayers through the Revenue online service, which is a very good example of electronic government in action. Another excellent example of this is the range of online services available to ratepayers through the Valuation Office's website. Anybody who has used the site will be aware of the full range of services available which, in my view, are second to none, particularly the online map. It is important in terms of ease of reference and transparency in the system.

A number of Deputies made the case for the greater use of self-assessment, as it works well for other charges and other taxes. This was also discussed in the other House. As I stated in my opening speech, the Bill will introduce a form of self-assessment. It will introduce much more self-assessment than exists, which will be known as occupier-assisted valuation. This is an extra tool which will not only enable the ratepayer to be more involved in the process but will accelerate and assist in helping to speed up the revaluation programme.

I do not agree the valuation for rates purposes is a simple exercise, nor that I have been captured and told everything is too complex nor that this is a system that lends itself to self-assessment in the same way as the local property tax. As Deputies are aware, the valuation determines the slice of the rates burden one will pay. If a group of occupiers of property undervalue their properties, those who will pay are the ratepayers who correctly value their property. There is a knock-on effect as the pie remains the same. A move to a system which has these implications must be introduced very carefully.

Deputies Fleming and Wallace suggested simply using a percentage of rent. On a theoretical level, the valuation system is very close to this view, as rental values are key to the determination of valuations. What they suggested might work in a simplified world, but rents are not always simple. There are incentives for tenants, including rate-free introductory periods and rent holidays, and these are provided for in section 48, which dictates how values are determined. In addition, not every ratepayer is a tenant and not every valuation can therefore be based on rent. The Valuation Office must use other methods, including receipts, expenditure and the contractors method, which looks at the cost of replacing the building. The element of self-assessment now being introduced will contribute to the completion of revaluation, and in time I expect it to become a larger part of the system which will be very much welcomed by ratepayers and business organisations as a progressive step forward.

Deputies Fleming, Stanley and Fitzmaurice spoke about the incentives to revitalise town centres, including incentives based on refunds of rates. They made the point the system is overly complex and that a grant system should be introduced rather than giving a rates reduction. I was interested to hear of Deputy Fleming's experience in County Laois, and I look forward to learning more about it. I, as I am sure do all Members of the House, applaud local authorities who take initiatives in this area and I have sympathy with regard to the complications imposed upon them, but what we are discussing here is valuation legislation and not rates legislation which governs the collection of rates, and there is a difference. There is no doubt they are interconnected and interdependent, but there is a difference. I am bringing a valuations Bill through the Oireachtas as quickly as possible in the interests of ratepayers.

Introducing rate-free periods in rural or other areas, as suggested by Deputy Wallace, has implications for local government funding in these areas and this cannot be ignored. Levelling the playing field, whether referring to locations or sectors, is a key output of revaluation. I suggest in a constructive sense that it is the job of local authorities and those elected to them to play their part at local level, and I am encouraged to hear this is happening in Laois. We need to see more initiatives in all our local authorities.

Reference was made to the merger of various organisations into Tailte Éireann, and that this is causing a delay in the revaluation programme.

The position is that in line with this Government's policy of rationalising the number of State agencies, we are proceeding with merger of the Valuation Office, the Property Registration Authority and Ordnance Survey Ireland, and a new organisation, known as Tailte Éireann, will be established by legislation. Significant progress has been made in bringing this merger about, and the Minister for Justice and Equality has recently announced the draft legislation through which the new body will be established. Under the general scheme announced by the Minister, Deputy Fitzgerald, it is not envisaged that the establishment of this new body will have any delaying effect on the national revaluation programme. On the contrary, Part 5 of the general scheme of the Bill provides specifically for the retention of the statutory office of Commissioner of Valuation, which shall be independent in exercising the functions ascribed to him or her under the Valuation Act. Accordingly, the establishment of Tailte Éireann will result in continuity of operations in regard to the national revaluation programme.

We also had a discussion during the debate on Second Stage here about a new discretion that is being introduced where there is no material change of circumstances. I argue this is a very positive change to the existing Valuation Act and will allow the commissioner to correct serious anomalies between revaluations. Deputy Fleming has a view that this should be mandatory as the commissioner would not give this discretion the priority it deserves, but I can assure him I do not believe that to be the case. The Valuation Office completed more than 22,000 revisions since 2011 in parallel with its work on the revaluation. The new discretion is welcomed by the commissioner who has always had an overriding concern in ensuring that the valuation list is equitable and uniform, and this new discretion will not be low on that list of priorities.

The ability of the valuation and rates system to respond to changing economic circumstances was raised by a number of Deputies on all sides of this House. The acceleration of the revaluation programme has the same ultimate objective. Prior to the initiation of the revaluation programme, the system was very unresponsive and our aim is to get all local authority areas valued for the first time and, crucially, to get them on to the regular five to ten-year cycle provided for in the Valuation Act 2001. This will represent a sea change for the valuation system and, ultimately, those revaluations - I would share the Deputies views' on this - should be closer to five years rather than ten years.

Many Deputies welcomed the positives in this legislation, including the new exemptions for sports clubs and not-for-profit child care providers, and I acknowledge those contributions. I would also like to outline how the Government arrived at a position in regard to not-for-profit child care providers versus other child care providers. I share Deputy Troy's view that the issue of child care is a major one that needs to be addressed. I acknowledge the work done by my colleague, the Minister for Children and Youth Affairs, and the new intergovernmental committee that will examine this area and report to him before the summer, as I recall. Valuation legislation can only go so far. For every single ratepayer, be it a body or business, we exempt, somebody else has to pay. The pie stays the same. The criterion I have applied is that if one is established for the purpose of making a profit, it is not my job to determine which business profit, business motivation or line of business is more societally worthy than another. It is not my job to decide that the butcher who has set up to make a profit should pay extra rates for the child care provider who has set up for a profit. If one has set up to make a profit, one is rateable. That is the current position. I do not envisage that changing, certainly not in this legislation. The provision in respect of not-for-profit child care providers will exempt about 1,000 not-for-profit child care providers throughout the country and will also bring consistency, as there had been an inconsistency in terms of how that had been applied.

I am keen, as I am sure are many Deputies on all sides of the House, that this legislation is enacted without much further delay. I very much look forward to robust debates on Committee and Report Stages, but it is important, as Members have acknowledged, that we ultimately get this legislation passed. Once the legislation is enacted, the Valuation Office is ready to set the wheels in motion on the pilot outsourcing and the occupier-assisted valuations. I can inform the House that the necessary regulations on occupier-assisted valuations are already at an advanced stage of drafting.

I want to refer to one other issue that came up during the debate, that of subsequent occupiers' rates liability. While it is a rates issue, it is important to point out, and there did not seem to be a recognition of this from a number of speakers, that this was already addressed last year by the Local Government Reform Act 2014. That legislation was enacted in January 2014 and it introduced a range of reforms to the local government system. It included some important measures to address some of the main issues affecting payment of commercial rates by businesses, including, and this is important, the repeal of subsequent occupier liability. Schedule 2 and Part 6 of the Act repeal subsequent occupier liability within rating law by amending section 71 of the Poor Relief (Ireland) Act 1838, no less, and deleting section 19 of the Poor Relief (Ireland) Act 1849, the effect of which was to remove the liability that was placed on new occupiers of properties for up to two years of outstanding rates of the previous occupier. This repeal took effect from 24 March 2014. Therefore, people can now occupy premises that have been vacant and benefit from that provision which took effect from 24 March last year.

I thank Members on all sides of the House for the input. I believe this Bill modernises the valuation system. It is not a magic wand; it is just one part of the toolkit that we need to put in place to make sure that we have a modern and fit-for-purpose system for how the State interacts with the business community. I look forward to Committee Stage and to considering any amendments Members may wish to put forward on that Stage. I commend the Bill to the House.

Question put:
The Dáil divided: Tá, 56; Níl, 27.

  • Bruton, Richard.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Áine.
  • Conway, Ciara.
  • Costello, Joe.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Doherty, Regina.
  • Dowds, Robert.
  • Durkan, Bernard J.
  • Fitzmaurice, Michael.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Gilmore, Eamon.
  • Hannigan, Dominic.
  • Harris, Simon.
  • Howlin, Brendan.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lyons, John.
  • Maloney, Eamonn.
  • McEntee, Helen.
  • McFadden, Gabrielle.
  • McGinley, Dinny.
  • McGrath, Finian.
  • McNamara, Michael.
  • Mitchell O'Connor, Mary.
  • Mulherin, Michelle.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Penrose, Willie.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Rabbitte, Pat.
  • Ryan, Brendan.
  • Shatter, Alan.
  • Spring, Arthur.
  • Stagg, Emmet.
  • Tuffy, Joanna.
  • Varadkar, Leo.
  • Wall, Jack.
  • Walsh, Brian.


  • Broughan, Thomas P.
  • Calleary, Dara.
  • Collins, Joan.
  • Coppinger, Ruth.
  • Cowen, Barry.
  • Creighton, Lucinda.
  • Crowe, Seán.
  • Dooley, Timmy.
  • Ellis, Dessie.
  • Flanagan, Terence.
  • Fleming, Sean.
  • Fleming, Tom.
  • Higgins, Joe.
  • Keaveney, Colm.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Mathews, Peter.
  • McConalogue, Charlie.
  • McGuinness, John.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Ó Caoláin, Caoimhghín.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • Ross, Shane.
  • Stanley, Brian.
  • Troy, Robert.
Tellers: Tá, Deputies Joe Carey and Emmet Stagg; Níl, Deputies Seán Ó Fearghaíl and Sean Fleming.
Question declared carried.