Adjournment Matters. - Commercial Rates.

Some time ago concern was expressed by those who run bed and breakfast accommodation, particularly registered bed and breakfast accommodation, that the Government intended to impose commercial rates on their properties. This rumour has been going around for many years but it appeared to gain some weight recently, particularly in view of the Valuation Bill. I received a barrage of letters from people involved in the provision of bed and breakfast accommodation expressing concern at the possibility of being brought into the commercial rates net under the Bill.

In the past week the Government appeared to withdraw this proposal. However, the Department informed me that the proposal has not be withdrawn but is being re-examined in light of the Valuation Bill. The proposal has not gone away and there is still a possibility that commercial rates will be introduced for bed and breakfast accommodation.

We need to consider the contribution which bed and breakfast accommodation has made to tourism and the economy in general. Coming from the west, I recognise the value and the contribution which this sector has made since the foundation of the State when tourism was in its infancy and when hotels were limited in number and quality. The State itself had to establish the Great Southern Hotel Group to ensure certain standards were met.

As a result of deficiencies in the accommo dation sector, much of the tourism industry centered on these small houses scattered throughout the State in which families would provide accommodation. They benefited from it, getting money over the three short months of the tourism season. What did they do with that money? Those living outside the university towns used the money they made during the summer to help their children to attend university and to live in the towns in which the colleges were located. Where did those children live in those towns? In other bed and breakfasts. The bed and breakfast sector made a contribution to education as well as to tourism. That still happens today.

Many tourists do not want to stay in impersonal hotels, they want to meet the people. Very often they come back to the same bed and breakfasts which have been so friendly in the past. When a person books into a bed and breakfast, they do not meet a receptionist who comes out with the spiel he or she has learnt at a regional college, they are given a personal welcome by the home owner. Those people are made to feel like members of the family. The family acts as an information bureau for tourists, telling them where to go, where to eat and what to see. The personal touch, our unique Irish hospitality, was a product of the bed and breakfast industry.

One could say that if they are making money, they should be taxed. Tax concessions have been given for the development of substantial hotels throughout the State. Small approved bed and breakfasts should be in the same category by not being brought into the commercial rates bracket. Tax benefits are granted to hotels and other tourist facilities, why not to the backbone of Irish hospitality?

There are many bed and breakfast establishments scattered throughout the west and south west. Most of them are in small towns which have no hotels or only a very small hotel. We must try to ensure that when tourists arrive, the smallest towns, villages and farmhouses receive a share of the wealth generated. The only way to do that is through an assurance that bed and breakfasts will be able to survive.

If the commercial rate is introduced, many of the people running such establishments will simply shut them down. There is only a short season and they do not make a substantial amount of money in that time. They pay their taxes and also pay fees to Bord Fáilte to ensure standards are maintained. If commercial rates are introduced, it is highly likely that these premises will have to pay commercial electricity prices. It will ensure the demise of an industry which has sustained tourism in the State and which still has a major role to play.

I hope the Government will guarantee that it will not introduce commercial rates for small family homes in the Valuation Bill.

I am responding to this issue on behalf of the Minister of State at the Department of Finance, Deputy Cullen. The motion relates to the forthcoming Valuation Bill and I will preface my comments on the motion by providing some background to the Bill.

At present, the core legislation dates from the mid-19th century and needs to be replaced with a comprehensive, modern statute. The failure to update the legislation comprehensively has drawn unfavourable comments from the Judiciary in the past. Legislation was promised during the debates on the 1986 and 1988 Valuation Acts, when it was indicated that these measures should be seen as a prelude to a single, modern statute covering all aspects of valuation for rating purposes. The new legislation is designed to improve and streamline the operation of the valuation system, to remove serious deficiencies, to bring it more into line with the contemporary commercial environment and to make the system more transparent and equitable for the ratepayer.

The measures proposed in the draft Bill should make the valuation system more acceptable and defensible, thus enhancing the security of the very substantial revenue dependent on it. In 1995, prior to work commencing on the preparation of the Valuation Bill, an interdepartmental review of the rateable valuation system was undertaken by the Department of Finance, the then Department of the Environment and the Valuation Office, and the Bill will be largely influenced by their recommendations.

The Government has approved the heads of the Bill and, subsequent to this, a draft was prepared by the parliamentary draftsman's office. Officials in the Department of Finance and the Valuation Office have returned comments on this draft to the parliamentary draftsman and the final draft should be produced in a matter of weeks. At that stage the Bill will be submitted to the Government for its approval and publication of the Bill will follow shortly after.

Currently, rates are only levied on hotels and guesthouses registered with Bord Fáilte. Bed and breakfast accommodation and "unregistered" guesthouses are treated as domestic property for rating purposes. The Local Government (Financial Provisions) Act, 1978, which derated domestic property, defined as domestic any hereditament used to provide "lodgings". While the 1978 Act never defined "lodgings", case law which as evolved since has invariably regarded bed and breakfasts and unregistered guesthouses as "lodgings" and consequently they are not liable to pay rates.

The interdepartmental review of the rateable valuation system recommended that bed and breakfast type accommodation should be included in the rateable valuation base to put it on the same footing as hotels and guesthouses. Naturally that recommendation has to be given full consideration by the Government. I can confirm that a final decision on this matter will be taken by the Government when it considers the text of the Valuation Bill in the near future.

There are, however, practical difficulties associated with a move to bring bed and breakfast accommodation into the rates system. At present there is no authoritative list of bed and breakfasts and a property can be converted from domestic use to bed and breakfast of self-catering without reference to any authority. In the case of bed and breakfasts operated on a seasonal or intermittent basis, the valuation lists would have to reflect their changing status and because bed and breakfasts have not been rateable for the past 20 years, the valuation lists are out of date with regard to such properties. There are 4,400 bed and breakfast operations approved by Bord Fáilte but, while there is no precise figure available for the number of unapproved bed and breakfast operations, it could be over 7,000. There is no requirement on bed and breakfasts to register with any official body. In addition, it is estimated that there are up to 6,000 commercially provided self-catering holiday units.

It is generally accepted that the provision of good quality, affordable accommodation by bed and breakfast operators has been a contributory factor to the growth of Irish tourism in recent years and the contribution bed and breakfast operators have made, and continue to make, is vital to this important sector of the Irish economy.

I have been informed that the Department of Finance has received a considerable level of correspondence from Deputies, Senators and other interested parties throughout the State on this issue and there is a realisation of its importance at local level. I assure the House that the Government will consider the points raised by the bed and breakfast sector through its representatives when it gives approval to the final draft of the Bill, which is expected to be submitted to Government within weeks.

The Seanad adjourned at 6.10 p.m. until 10.30 a.m. on Wednesday, 29 March 2000.