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Seanad Éireann debate -
Wednesday, 9 May 2001

Vol. 166 No. 11

Valuation Bill, 2000: Second Stage.

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

As Senators will be aware, the Bill is the first comprehensive valuation legislation introduced since the 1850s. It is designed to modernise, streamline and improve the operation of the valuation system, which was the basis for the collection of slightly more than £450 million in local authority rates in 2000.

The legislation will remove deficiencies that have built up over the years in the valuation system, bring the system into line with the contemporary commercial environment and make it more transparent and equitable for the ratepayer. A key motivation for introducing the legislation is to allow a valuation of commercial and industrial properties to take place in all rating authority areas over a period of years; a national valuation has not been undertaken since the middle of the 19th century. By this means, a uniform and equitable valuation base will be established and anomalies will be removed. There will be a return to the use of full net annual values, rather than the confusing fractions arrangement that is operated at present.

Provision is being made in the Bill for periodic valuations to be undertaken in all local authority areas on a five to ten year basis. This will ensure that valuations are kept in line with changes in market values and provide for fairness and equity between ratepayers.

Increasing local authorities' rates income through a valuation is not the purpose of the new legislation. To put this beyond doubt, provision is made for the capping of the increase in the overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes, to a percentage not greater than the increase in the consumer price index.

I am glad the new legislation will enhance the opportunities for ratepayers to be involved in the valuation process from an early stage. In addition to retaining the existing multi-tiered appeals system, it introduces, at the initial stage of the valuation process, a new consultative phase. The consultative phase means that in future ratepayers will be notified of the Valuation Office's proposed determination in respect of their property before it becomes effective for rating purposes. The ratepayers will then be given an opportunity of making a submission to the Valuation Office, if they so wish, about that determination. The Valuation Office will be required to take into account any such submissions received before the valuation certificate is issues and valuation list amended or published.

The Bill is comprehensive legislation which provides for the repeal of existing valuation legislation and its replacement by modern legislation for those elements of the current valuation system it is proposed to retain; a valuation of all rateable property in the country on a rolling basis – this means the valuation of individual rating authorities in a planned sequential manner, it is planned that the whole country will be valued over a period of five years and that there will be subsequent valuations at regular intervals thereafter; the continued use of net annual value – NAV – as the basis of valuation and a return to the use of full NAV; and the continued exemption from rates of a wide range of properties currently exempt from rates. Such properties include domestic property, agricultural land and non-residential farm buildings; land developed for forestry, horticulture or sport; State-occupied property; certain properties of a cultural nature such as non-commercial art galleries, museums, libraries, national monuments and legally designated national cultural institutions; property used by charitable organisations exclusively in a non-commercial manner for charitable purposes and property occupied by An Taisce; and bed and breakfast accommodation and self-catering accommodation. However, I am ensuring that aparthotels will be subject to rates.

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

In addition the Bill provides for the streamlining of the valuation process and providing ratepayers with a formal opportunity to be heard in the process of determining rateable valuations; new, or revised, valuations to be effective for rates purposes immediately from the date of being put on the valuation list rather than, as currently, from the beginning of the following rating year; enhanced powers for the Valuation Office to obtain information relevant to the valuation process and to obtain access to property for valuation purposes; the continued use and updating of existing valuation lists until such time as new valuation lists are made available from the initial valuation proposed in the Bill; and giving the Minister for the Environment and Local Government the power to specify the maximum rates income for local authorities in the first year in which a revaluation is effective for rating purposes. Furthermore, the Bill re-enacts various provisions relating to the Commissioner of Valuation and the Valuation Tribunal.

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

The existing valuation legislation provides for the valuation of all fixed property, including land and buildings. Valued also is incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The Valuation Office has responsibility for the valuation system. Rates are no longer collected on domestic property, as a result of the provisions of the 1978 Local Government (Financial Provisions) Act, or on agricultural land, as a consequence of a 1984 Supreme Court decision, although both of these categories of property are still included in the valuation lists. Therefore, the commercial and industrial sectors now effectively constitute the rateable valuation base.

The basis of assessment for valuation purposes is the net annual value of a property. The NAV of a property is equivalent to the annual rent, exclusive of all payments in respect of rates, taxes, repairs and insurance, which a property could reasonably be expected to command. The rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, that is the tenant or the owner in certain cases. Rating authorities and ratepayers have the option of having a property listed for revision. As no national valuation has been carried out in the last century and a half, this revision process is effectively the only way in which the valuation lists have been changed in the intervening years.

The principal recommendation made by the interdepartmental review group was that a valuation of all rateable property should be undertaken. The primary objectives of such a valuation are to remove anomalies in the valuation lists, to establish a uniform and equitable valuation base and to lessen the risk of any eventual challenge to the valuation system. Anomalies are widespread in the valuation lists. This is principally because no national valuation has been carried out since the national valuation of all property between 1852 and 1865. The rateable valuation of a property had been intended to be equivalent to its net annual value, but over time the rateable valuation increasingly represented a smaller and smaller fraction of the net annual value. It is necessary to update the valuation lists to eliminate any anomalies as they form the base on which a substantial part of locally raised revenue for local government is levied. This will be done through a national valuation based on the new legislation.

The proposed valuation, the first general valuation since the middle of the 19th century, will be a significant undertaking. Accordingly, the Bill provides that the valuation be carried out on a rolling basis. This means that each rating authority area will be separately valued as part of a planned sequential valuation of the whole country. The sequence will depend on the judgment of the commissioner of valuation, who will decide which rating authorities are most in need of a valuation. Each rating authority area will have its own base date, by reference to which valuations will be determined.

Uniformity between valuations will be established on a rating authority basis, whereby all valuations in a rating area will be uniform relative to one another instead of having a national uniformity, whereby all valuations in the State would be required to be uniform with one another. Between valuations, uniformity will be maintained on a rating authority basis. Such rating authority uniformity will be much easier to establish and maintain than a national uniformity, thus making it easier to ensure that ratepayers will be treated equitably. It is estimated that the valuation will be completed in about five years and will be more easily and safely managed under the approach of a rolling valuation, which was also favoured by the interdepartmental review group.

Using this approach, the commissioner of valuation will have the power to make an order for the valuation of a particular rating authority area. The base date, by reference to which valuations will be determined, will be designated in the commissioner's order and will be specific to that rating authority area.

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

A return to full NAV was recommended by the interdepartmental review group as a means of improving the ease of comprehension and transparency of the valuation system and as the most appropriate basis of valuation for commercial and industrial property. The concept of NAV has been used since the inception of the valuation system in both Ireland and Great Britain. When the valuation system was reformed in England, Scotland and Northern Ireland, NAV was retained as the basis of valuation. The continued use of annual values has several advantages as both ratepayers and valuation practitioners are familiar with the concept and use of NAV in determining rateable valuations. The concept and use of NAV are familiar also to the courts and there is readily available evidence on which NAV can be based. Annual values are generally sufficiently stable to provide a predictable and reliable revenue base for rating authorities.

It is considered that a return to using full NAV may cause the level of rateable valuations to increase on average by the order of three hundredfold or so, although the increase on individual properties will vary considerably. Consequently, the rate in the pound charged by local authorities will be reduced sufficiently to offset the increase in rateable valuation and hence deliver a revenue neutral outcome, subject to some adjustment for inflation. Therefore, provision is being made for a cap to be placed by the Minister for the Environment and Local Government on the increase allowed in overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes, to the increase in CPI.

A valuation, however, will lead to a redistribution of the rates burden between ratepayers, reflecting changes in the property market that have taken place over the years. Because of the multiplicity of relevant factors involved, the precise effect of a valuation on individual ratepayers' rates bills cannot be indicated before the valuation has been completed.

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

It is intended that after the completion of the first national valuation, subsequent valuations of rating authorities will be carried out at regular intervals to ensure that the valuation base is kept up to date. Accordingly, the Bill requires the commissioner to complete a valuation of a rating authority area no earlier than five years and no later than ten years after the previous valuation of that authority area was completed.

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

Under the current valuation system, a ratepayer or a rating authority can appeal a determination by the Valuation Office, first to the commissioner of valuation and, second, if dissatisfied with the commissioner's decision, to the valuation tribunal. Both of these appeal provisions are being retained, as is the option of an appeal to the High Court or Supreme Court on a point of law. However, the Bill augments the formal appeal process with an earlier phase, called the consultative phase, during which the ratepayer will be notified of the Valuation Office's proposed determination before it becomes effective for rating purposes, and will be given an opportunity of making a submission to the Valuation Office, if he or she so wishes, about that determination. The ratepayer will have 28 days within which to make such a submission to the Valuation Office before the valuation certificate is issued and the valuation list is amended or published.

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

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

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

Making State-occupied property subject to rates would have to be on the basis of "clawback" measures from the local government fund being put in place to compensate for the significant rates income that certain local authorities would derive from State-occupied property. It must also be recognised that the local government fund has increased considerably in recent years. Rating State-occupied property, with "clawback" measures from the fund being put in place would almost certainly result in no reduction in the rates paid by current ratepayers.

I should stress that the Valuation Bill, while continuing to exempt State-occupied property from rates, provides for the commissioner of valuation to value these properties in the first revaluation following enactment. This will allow for rates to be collected in respect of these properties should Government decide at a later date to pursue that course of action.

I will now turn briefly to the individual parts of the Valuation Bill. The Bill consists of 13 Parts and five Schedules. Part 1 contains provisions of a general nature, including the interpretation section, and issues such as fees and expenses. Part 2 sets out the terms and conditions of office of the commissioner of valuation, the delegation by the Minister to the commissioner of certain functions and the procedures concerning the delegation of functions by the commissioner. Part 3 refers primarily to Schedule 2 which sets out the terms under which the valuation tribunal will continue to operate.

Part 4 deals with property to be valued. It provides for the definition of relevant property to be valued and the categories of relevant property that will and will not be rateable under this Act. It sets the time from which the Act will become effective and the discretion the commissioner has to value contiguous relevant properties occupied by one occupier as one unit or in valuing one relevant property capable of being occupied separately.

Part 5 provides for the valuation process and contains provisions relating to the valuation order to be made by the commissioner to undertake the valuation of a rating authority area. It also contains provisions relating to the subsequent publication of the valuation list and the issuing of the valuation certificate to each occupier prior to the publication of the valuation list to allow for submissions to be made to the valuation manager, who will be charged with the responsibility of overseeing the valuation process. The process of allowing the occupier to make submissions regarding the proposed value of his or her property, which have to be taken into account before the final value of the property is set, is, as I have already mentioned, commonly referred to as the consultative stage.

Part 6 of the Bill makes provision for the revision of a valuation list in respect of a particular property or properties between valuations of the relevant rating authority area. It also provides that the revision officer, who is deemed responsible for undertaking the revision, will issue a valuation certificate or written notification of his or her decision within six months of appointment. This Part provides again for the consultative stage to be part of the revision process, as in the case of the valuation of a rating authority area.

Part 7, which is a reasonably long Part, provides for an extensive appeals process to which I already referred earlier. The Part provides that the occupier of the property in question, an occupier of other relevant property in the same rating area, a rating authority or an interested third party can appeal in writing to the commissioner in respect of a property's valuation. This also applies in respect of determinations by revision officers. The appellant must specify the grounds on which he or she considers the rateable valuation as determined is incorrect and what the rateable valuation should be in his or her opinion. This Part also provides that an occupier must be informed if his or her property is the subject of an appeal by some other person.

The commissioner of valuation is required to make a decision within six months of receipt of an appeal. A further appeal against the commissioner's decision can be made in writing to the Valuation Tribunal. The tribunal is again required to issue its decision within six months of receipt of an appeal. There is a subsequent right of appeal to the High Court and Supreme Court on a point of law. This Part also provides that in relation to decisions by either the tribunal, High Court or Supreme Court in connection with a property, the valuation list will be amended as appropriate, and this will extend to similarly circumstanced properties if so required.

Part 8 requires the commissioner to produce an annual report to the Minister for Finance in connection with the exercise of his or her functions, and for the Minister to cause copies of the report to be laid before each House of the Oireachtas. It also requires public bodies to supply information to the commissioner if they believe such information would lead to an amendment of a valuation list in respect of a particular property. This will apply primarily in the case of rating authorities, and where State-occupied property, which is not subject to rates, is vacated.

Part 9 gives statutory authority to existing valuation lists as it will be some time before they are all replaced as a result of the valuation of every rating authority area. The revision and appeals process outlined in the previous Parts will also apply to existing valuation lists.

Part 10 provides for certain ancillary powers to be granted to the commissioner of valuation and his or her officers. These include that information as requested from an occupier of property must be supplied, if so requested, and must be updated by the occupier as appropriate. It also repeats the power to enter property for the purpose of carrying out the valuation function.

Part 11 provides for and defines the net annual value basis of valuation. It also provides that if, in determining the NAV of a property, a method of valuation relying on the notional cost of constructing or providing the property is used, then NAV shall be an amount equal to 5% of the aggregate of the replacement cost, depreciated where appropriate, of the property and the site value of the property. This Part also provides for the global valuation of public utility undertakings.

Part 12 provides for a cap to be placed by the Minister for the Environment and Local Government on the increase allowed in overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes to the increase in CPI. Part 13 includes various miscellaneous and transitional provisions. It also removes the anomaly whereby mines and rights to drill for and extract petroleum become rateable only seven years after opening or commencing in the case of mines, and 20 years in the case of petroleum. It provides in certain circumstances for prosecutions and penalties. It also provides for a procedure whereby a valuation can be determined in respect of a property, even if it is listed in Schedule 4, that is, relevant property not rateable, if such a valuation is required for legal reasons relating to enjoyment or entitlement of that property.

There are five Schedules to the Bill. Schedule 1 sets out the enactments to be repealed as a result of the amendment and consolidation of the existing valuation code. Schedule 2 deals with the construction, membership, terms and conditions of office, staffing, powers and procedures of the Valuation Tribunal to be established under section 12. It broadly repeats the conditions applying to the current tribunal. Schedule 3 lists the categories of relevant property which will be valued and which, in most cases, will be subject to rates. Schedule 4 lists categories of relevant properties which are not to be rated. Schedule 5 lists the categories of plant to be valued as part of a property.

The Bill is the first comprehensive valuation legislation introduced since the 1850s. It is designed to modernise the operation of the valuation system, to remove deficiencies that have built up over the years to bring it more into line with the contemporary commercial environment and to make the system more transparent and equitable for the ratepayer. It will allow a valuation throughout the country to take place, the first since the middle of the 19th century. Such a valuation will enable a uniform and equitable valuation base to be established and anomalies to be removed. It will also allow a return to full net annual values. Provision is made for regular valuations every five to ten years to prevent the system from becoming outdated to such an extent in the future. It enhances the appeals process and provides the opportunity for ratepayers to be involved in the valuation process from an early stage.

I must again stress that the Bill is not designed to increase the rates income of local authorities and, therefore, provides for a cap in the overall rates income in the year in which the revaluation takes effect. I commend the Bill to the House.

I welcome the Minister of State. The Bill has four main objectives – to review the law relating to the valuation of properties which is based on 19th century legislation; to facilitate a revaluation of all rateable property in the country; to make the valuation system more transparent to taxpayers and rating authorities; and to define clearly the categories of properties which are rateable and non-rateable.

To facilitate the revaluation of all rateable property, it is proposed under the Bill that a commissioner of valuation should oversee a complete revaluation of the entire country. This can be carried out either on a national basis, involving simultaneous revaluations in all local authority areas or, alternatively, and probably more realistically, with a review of local authority areas being dealt with at the same time or even individually. This process may create an imbalance between different areas and, if possible, a revaluation of the entire country should be carried out at the same time to avoid possible distortions between areas.

It is of great concern to the business community because it is of the view that distortion in competitiveness will result if a lengthy rolling revaluation process takes place. A business operating in the Dublin area, for example, having gone through a revaluation itself, could be at a considerable competitive disadvantage compared to a competitor outside the city which may not be scheduled to undergo revaluation until well into the future – as much as five years later. Such timescales are not wholly unexpected given that 150,000 establishments will have to be revalued.

To initiate the revaluation process, the commissioner will make an order to be known as the valuation order in relation to each local authority area. The valuation order will state the base date at which all property is to be valued and the date of publication of the valuation list. This list has to be published within three years of the valuation order. A revaluation certificate stating the value of the property, as determined, is to be issued to the occupier of every property included in the valuation list not later than seven days before the publication of the list. It would be helpful if the rating authorities were to receive the final valuation list in August or September each year for greater forward planning in the preparation of estimates of expenses. It would, therefore, be beneficial to rating authorities if valuation list publication dates were to be agreed between the commissioner of valuation and the individual rating authorities.

A very important element of the Bill is that it proposes to introduce an element of consultation between the Valuation Office and the ratepayer in the revision process. A request to have a property listed for revision is currently sent to the local authority involved. Under the new legislation a request will be sent directly to the commissioner of valuation. He will then appoint a revision officer who, following inspection of a property and calculation of its estimated rate of valuation, will then send a copy of the proposed valuation certificate to the ratepayer. The ratepayer, in turn, will have 28 days in which to make representations on any matter about which they feel aggrieved.

In an effort to allay the fears of ratepayers who may see the introduction of this legislation as a means by which rates will be increased, the new legislation proposes to introduce a capping system for the rate in the pound for local authorities. It is proposed that the cap will be in the region of 5% – it is 9% at present – and that involves a little reduction for local authorities.

It has been argued that the commercial rate base should be expanded to include all Government buildings, apart-hotels and certain categories of bed and breakfast establishments. I am pleased to note that on Report Stage in the other House the Minister introduced an amendment regarding apart-hotels. I also am thankful that in regard to the membership of the valuation tribunal, the Minister of State continued the principle set by an amendment in my name to the Ordnance Survey Ireland Bill, 2001, which he accepted. He said in the debate in the other House that this practice would be continued in future Bills and I welcome the progress we have made in that area.

Credit for that is due to the Senator.

I thank the Minister of State for saying so.

The Bill should be amended to provide that bed and breakfast establishments with six or more rooms available for guests should be liable for rates on that portion of the premises. This would not adversely affect smaller establishments.

The Third Schedule also retains the existing exemption of State properties from rates. Rates should be levied on all State property and if central Government legislates that Government properties be exempt from rates, then the Government should pay full compensation to local authorities. I note that the Minister of State stated in his speech that he has received representations on this matter from IBEC and the Dublin Regional Business Alliance. While he stated that rates have never been levied on Government properties, nevertheless an income was paid to local authorities in lieu of rates on Government buildings from 1870 until 1987, and he stated that this contribution was subsumed into the rates support grant. If rates were levied on Government property, the main beneficiary would be Dublin city because the greater proportion of Government properties are in this city but as the Government's policy of decentralisation comes into effect, other parts of the country will be making the same case I am making here – that the Government should make a payment in lieu of the full rate.

The Minister of State stated that the payment was subsumed into the rates support grant, but that payment, which I acknowledge is not the responsibility of the Minister of State, has fallen well behind because the Dublin Corporation is not receiving anything like what it received previously for Government properties under the rate support grant. This is something which should be looked at because the city of Dublin must provide all the services for people who use Government properties as well as providing services for people from outside the city who come to use its services. No payment is provided for that service which Dublin city must provide for the rest of the country.

It should also be remembered that the State is no longer exempt from the planning process and Departments must now prepare budgets which reflect the full extent of administrative costs, one of which would be the cost of occupying the property. Therefore there is some basis for providing for a increased payment for Government properties.

The Bill is laudable in many respects. The proposals, however, will effectively impose a greatly increased workload on the already stretched resources of the Valuation Office. It may be in recognition of this fact that the Bill fails to set down a date for start of the first revaluation and provides only notional time scales for subsequent revaluations which the commissioner is not statutorily obliged to fulfil.

The new legislation is definitely an improvement on the current position but whether it is sufficiently farreaching is a question which still must be answered. This is a technical Bill which can best be dealt with on Committee Stage. I certainly will table amendments on Committee Stage and I hope I will be as successful as I was on the last occasion.

One never knows.

I welcome the Minister of State, Deputy Cullen, to the House. I recall talking to him on many occasions about this Bill over a year ago. It has been in the pipeline for a long time but I am delighted to see it before us now.

Many business people fear measures which will increase the fixed costs of doing business. I know the Minister of State is very conscious of this, so much so that in the first page of his speech he stated that the objective of the Bill was not to increase rates for business people or people trying to make a living but rather to make the system more transparent, modern and streamlined and to improve the operation of the system. This system was the basis for the collection of over £450 million for local authorities in 2000. No doubt a system which has not been changed since the 19th century really needs to be looked at and that is the purpose of the legislation.

It is important to make all such legislation transparent and equitable for the ratepayer. The Minister of State has identified this and he has spoken about the motivation from outside the Houses regarding the key objectives of the Bill.

It is interesting to note that there has not been a national valuation since the middle of the 19th century, and that has led to many anomalies in the system and to a lack of uniformity and equity throughout the system according to local authorities. It will be interesting to see the change in that regard. Recognising that it will not be easily achieved, however, the Minister of State has recognised that this must be done by way of a roll-out scheme.

I want to reiterate, in order to put it beyond doubt, that provision is made for the capping of the increase in the overall rates income of a local authority in the year in which the first valuation is used for rating purposes. I welcome this cap. It will make life a little more comfortable for business people, particularly those in smaller towns and villages around the country.

The issue of imposing rates on bed and breakfasts was addressed by Senator Doyle and in the Dáil. It was interesting to read the contributions made by a huge number of Dublin Deputies who argued that the problem was different in Dublin but seemed to ignore the fact that that may be no reason to introduce legislation which would impose rates on bed and breakfast accommodation. When one goes outside the Pale or Galway city centre, one sees how people have benefited from operating bed and breakfasts and what that business has done for many families. Indeed, there were many people who made it to college or secretarial school because their fees and accommodation were paid for by the mother who was able to run bed and breakfasts for a couple of weeks during the summer. These people were able to make a few pounds through this worthwhile addition to tourist accommodation.

While I accept there is certainly some need to look at the area of licensing bed and breakfasts, this must be given careful attention. There is a need to recognise that circumstances in Dublin are different from those in the rest of the country. In too many instances, the solution provided to a Dublin problem has badly affected the rest of the country, but I do not wish to go into the specifics of that. While I have no objection to apart-hotels being subjected to rates, I certainly would have grave concerns about imposing rates on bed and breakfast accommodation. With the consultative process, it is possible to identify guesthouses and bed and breakfasts which are being run as mini- businesses, where the family does not live on the premises, it is being run by a manager and the premises were built for that purpose only. However, many bed and breakfasts contain five or six bedrooms which have become available for bed and breakfast use because the family has grown up. Even in such a situation, I would be concerned if people felt that any bed and breakfast with four or five rooms should be rated. I appeal to the Minister, and to whomever might be involved in the future, to recognise in any licensing system the different status of bed and breakfast businesses, both urban and rural.

I mentioned the rolling valuation approach and the Minister has quite rightly identified that there would be no possibility of having this for the country as a whole. It is to be carried out on a rolling basis and each rating authority will be separately valued as part of a planned sequential valuation. One of the good things about this approach is that, as we move from one rating authority to another, there will be lessons learned which can only improve the process provided it is open to review, amendment and further review to ensure it is working.

Uniformity between evaluations will be established on a rating authority basis whereby all valuations in a rating area will be uniform relative to one another instead of having a national uniformity where all the valuations in the State would be required to be uniform with one another. Recognition that we cannot have uniformity across the nation is very important because a business at the far end of County Galway, in Letterfrack or Roundstone, will be run in a different way and encounter different problems from businesses in the city of Galway or further afield in Athlone or Dublin. It is important that we see uniformity but not necessarily national uniformity and I therefore welcome the approach taken.

The Minister spoke comprehensively about the impact on ratepayers and the basis of valuation. People are not sure how the system operates or what it means. I am a little concerned about one of the things the Minister says and I ask him to address it in his reply. He talks about the likelihood of the rateable valuation base being redistributed within the rating area, with the bills of some ratepayers increasing and those of others decreasing. While we will always be delighted to see the bills coming down, we may see some bills going up. Are we talking about a redistribution within a local authority area where one street will pay more money and another will pay less? That needs to be clarified. We need to know if, where there has been a huge change, it falls within the cap. For instance, as Quay Street has become the restaurant centre of Galway city, is that to mean all the premises on that street face a hugely increased valuation, with other areas getting a decreased valuation? Where does that fit in with the cap and the commitment we are giving to try not to increase rates?

While we currently have a revision process, which allows ratepayers and rating authorities to apply for a revision of the valuation lists to take into account any change in circumstances, it is currently being changed so that it will take account of the new valuations system. I welcome that. As the Minister says, it is obviously unfair to a ratepayer to have to wait until evaluation takes account of any change in circumstances of a property for a lower rates bill to result.

People do not understand the appeals process and how valuations are worked out. There are companies, operating mainly from Dublin, who write to companies offering to make a valuation of rates which they will submit to the local authority. They say they do this type of work all the time for various local authorities and they offer to seek a reduction in rates. Their manner of doing business is often very confusing and not transparent, perhaps purposely so. I would like to see a voluntary code of conduct for people who are utilising this legislation to provide a commercial service. They must be open and transparent and operate in a manner that does not cause confusion. I have been approached by older people, in business for a long time, who have received letters from these companies indicating a significant increase in rates due to the new valuation and offering to solve it all for perhaps 10% of the amount of the money the company will save their customer. That way of doing business is not very competitive, nor is it transparent. Perhaps regulations are needed to put in place a code of conduct.

The Bill completely ignores information technology. I would like to see all of the information we are putting together, all of the processes and how they work, available on a website. As in the case of the Revenue Commissioners, a fully electronic system should be in place whereby, if a person so wished, all dealings could be done with the Valuation Office on the Internet, or by e-mail, and all the information needed would be available on a webpage. People do not mind paying a tax provided they can see its justification and I suggest that, in association with the local authorities who are benefiting from rates to the tune of £450 million, it should be possible to show on a website what the money is used for in each of the local authorities. We need a programme of co-operation between local authorities, for instance between Galway Corporation and Galway County Council, to launch webpages showing business people what the money has done for them.

People should be able to see what they are paying for, given that we are moving from the 19th century to the 21st century. Let us embrace modern technology and use it is as much as we can as a shop front for the Government and the Valuation Office, open 24 hours a day, 365 days a year. It would also be of importance to foreign companies who want to know what they have to do to set up business here, what they would be getting involved in, what rates are and what they do for the local community. Perhaps this is not the appropriate legislation, but I ask the Minister to consider putting that in place.

The Minister says the ratepayer will be notified of the Valuation Office's proposed determination before it becomes effective for rating purposes and they will be given the opportunity of making a submission to the Valuation Office. The ratepayer will have 28 days within which to make a submission before the valuation certificate is issued and the valuations list is amended or published. Would the Minister consider increasing the time allowed? We are changing the appeals time from 28 days to 40 and I suggest we consider investigating on Committee Stage whether people need longer than 28 days in which to make a submission. If we can deal with the issues in the first 28 days we do not have to enter a lengthy appeals process. Why not think about an increase from 28 days, if not to 40, to an equal number on either side of the argument?

The Minister mentioned State properties being exempted from rateable valuation. I understand that while at this stage it does not make great sense that money comes from one side of the Government to another, the Minister has recognised that in the future it may be entirely possible for Government and State properties to be rated and rates to be levied on them. To this end he has set up the valuation of such properties. If a future Administration decides to impose rates on State properties, that has been covered by this legislation. That is an indication that the Government is planning for the future.

Local authorities can make decisions as to what bodies are exempted from rates. One of the important elements of the recycling process is the charity clothes shop. These charity shops are operated by volunteers on a not-for-profit basis. People donate surplus clothing which is recycled through sale and the money raised goes to the charity concerned. In an effort to encourage this area of recycling I ask the Minister to consider rate exemptions for those types of premises. I know that some local authorities do not exempt these shops from rates but instead write off the rates bill at the end of the year. If we wish to promote waste management, we should allow an exemption from rates for these charity shops.

The Minister has outlined very comprehensively the various sections of the Bill. It is a Bill designed to modernise the operation of the valuation system, to do away with the difficulties and deficiencies which have built up over the years. It will bring the system into the 21st century. I hope the Minister will take note of my comments and I look forward to dealing with the Bill on Committee Stage. I commend the Bill to the House.

I welcome the Minister to the House and I also welcome the Bill. It is important that legislation which is approximately 150 years old is being updated. All pre-1922 legislation should be updated. Any legislation passed in the middle of the 19th century is well beyond its sell-by date and requires updating.

The purpose of the Bill is to put a valuation on or to revalue the business and industrial properties in the State which are appropriate for revaluation and to identify those which are exempt from valuation. It would be appropriate for us to look at the valuation process in terms of extending, if possible, the commercial rate base. It seems to be a conundrum that the Government has not extended the valuation process to include certain areas. This is the first legislation in nearly 150 years and it gives the opportunity for the Government to listen to the concerns of local authorities.

The commercial rate as it stands, certainly in Dublin, is the basis for a large part of the funding that goes towards the running of the city. The wider the base, the less the percentage increase that will occur on an annual basis. The greater the distribution, the greater the equity of the system.

I think we could set the good example here. The Government could accede to the request from the local authority for a full commercial rate to be levied on Government buildings. While it is proposed in the legislation that a rateable valuation would be put on Government property, it is not proposed that the Government would pay the levy. I cannot imagine how a rateable valuation is struck and then an exemption is granted to a particular body. It is a contradiction in terms. The Government may well think that all this money is transferred from the State to the local authority and so is kept within the family, but these are funds which are required for the operation of the local authority. This situation must be determined once and for all. Government buildings should be subject to a rateable valuation which would then be reflected in the commercial rate struck. This is not just a matter for a city like Dublin which has the major amount of the State's premises.

The Minister for Finance has a huge decentralisation policy in which he proposes to decentralise – I do not know if this is still his intention—

It is on its way.

I hate to say that time is running out, but no doubt the Minister is optimistic.

A full year yet.

We look forward to it. I think he is proposing to decentralise 10,000 civil servants, and quite an amount of property will have to be acquired for Government use. It will mean that each local authority would benefit if a commercial rate could be levied on those buildings. Such a move would be very desirable and very helpful to those of us in Dublin Corporation. We could have avoided service charges on refuse disposal this year if we had the commercial rate.

What about the polluter pays principle?

Absolutely, that is what we believe in.

That is a new one on me.

The business sector which produces all this unnecessary waste is getting away scot free in many areas.

Some 80% of the waste is domestic waste.

The agricultural sector produces a huge amount of waste and the construction sector produces about 50% of it. This sector is not paying rates of any sort for the disposal of waste, yet it is responsible for filling up landfills to a far greater degree than the miserly amount contributed by poor householders. We are paying sufficient central taxation which should deal with this matter rather than setting up another hotch-potch of charges.

We have been using the commercial rate to fund local government. We are operating with the Government refund grant and with the service charge. This is a mishmash in terms of the funding of local government. The Department of the Environment and Local Government makes a considerable input. We should look at some form of consolidation of the funding of local government and consider how it could be funded jointly by a commercial rate with either a local tax or part of the Exchequer funding that would be pooled and made available to local authorities. What we are getting at present is unsatisfactory.

As well as Government buildings there are guesthouses and bed and breakfast establishments – substantial businesses, given the booming tourism industry – which are not paying their fair share. Is it proposed to impose a valuation rating on these businesses? It is important that there is a receipt of moneys by the local authority in respect of services which it is necessary to provide for the tourism industry as well as the receipt of funds from central Government. Clearly this area is appropriate for future valuation.

I am not sure if agricultural land should be exempt. In virtually every farm, agri-business is the order of the day. I do not know how we can distinguish between agricultural land, domestic property and land developed for forestry, horticulture, sport or State-occupied land. That whole area of agri-business will have to be looked at afresh. Where agricultural land is developed for trading purposes and there are receipts, value added tax and so on it will have to be looked at as a business and should be subjected to the valuation procedure.

Another widespread phenomenon is professional activities and businesses run from domestic property. The most obvious is private rented accommodation. There has been a huge growth in profits for landlords whose premises are not subject to valuation and a commercial rate. I see no reason businesses of this nature should not be rated and subject to valuation. All types of other professional activities such as those conducted by lawyers and barristers are being carried out from what are termed domestic premises. That whole area will have to be looked into because it is a business operation.

Are private educational establishments covered by this legislation? Recently there has been phenomenal growth in such establishments.

They are rated.

I am pleased to hear that. They are commercial undertakings.

My other concern is how the valuation process will work. This notion of a rolling phase valuation process will create enormous problems and may result in areas being revalued while others would be subject to the previous valuation, with a resulting imbalance in terms of payment and competition. It may create a headache for local authorities which are trying to get their house in order not knowing whether in the coming year chunks of their property base will be revalued. How are we to deal with a five year rolling valuation and prevent unfair competition occurring in areas that may have been revalued while an adjacent area or property may not be revalued for three or four years? How will the treasurer of a local authority compile the budget for the coming year if the local authority does not know what areas will be included for the revaluation process, given that he does not know the extent of the income coming through? Perhaps the Minister would respond on that issue.

I regard the system and the rateability base as ad hoc. I have no doubt the system proposed will extend the base but it is still fairly strong on exempted areas. When Dublin City Centre Business Association conducted a survey of inner city property it discovered that only two-thirds of what could be reasonably construed as rateable property was actually rated and that the other property was not subject to rateable valuation. I do not know whether it presented a copy of its survey to the Minister of State. It suggests there are many anomalies in the manner in which business is conducted. The figure quoted was 150,000. How does one determine the businesses in operation – many of which are non-registered – ranging from landlords, who are registered if they so wish, to small operations set up as family businesses and other operations that do not pay much attention to normal procedures and where there is little or no follow up?

What type of census of rateable property to be valued will the Minister of State put in place? Will he carry out a survey of the entire country? Given that it is 150 years since the last legislation surely it is time to conduct a comprehensive survey of all businesses, industrial properties, agricultural properties and professional type proper ties from which businesses or industries operate. How will it take place? Will it be part of the rolling process? The Minister of State mentioned a consultative process where people will be asked to respond. We would like to have as broad a base as possible so that all would be satisfied when the process is complete that everybody is in the net and that it is fair. That is the kernel of the matter.

This should not result in an increase in the commercial rate. The Minister of State has indicated that such is not his intention. It is an updating and an upgrading of the system which has been in operation until now but if it fails to ensure that the valuation process is as extensive as it should be and that the exemptions are kept to a minimum, there is a danger that this legislation will not fulfil its intention.

I thank the Senators for their contributions. As Senators have said, this is important and significant legislation, which is long overdue given that we have not had primary legislation in this area since the middle of the 19th century. It is important that the valuation base be put in line with modern legislation, which is what we are doing.

All Senators raised similar issues. Senator Doyle asked about a rolling valuation rather than a national approach. The revaluation of individual rating authority areas is provided for in existing legislation and such revaluations have been carried out in Dublin and Waterford. The mechanism in the Bill by which the commission initiates a revaluation is an enabling provision to provide the maximum operational flexibility. It provides for both a national valuation and a rolling revaluation that allows the commission to revalue one, all or a number of rating authorities at any time.

When coming to a new valuation base it is important to understand that a whole local authority area will be dealt with in its entirety. The local authority area will know well in advance that this is happening. Just because new valuation legislation is in place, a local authority will not reduce the income from the rates applied. That simply will not happen. When I went around the country with the roadshow, as we called it, many local authorities and businesses expressed concern that this legislation would be used to significantly increase the income of local authorities to the detriment of the ratepayer.

Senators Costello, Cox and Doyle suggested valuing Government property throughout the country. I am very sympathetic to that view. When I was drafting the Bill, in discussions with my officials in the Valuation Office and the Department of Finance, it was one of the issues we discussed at length.

Nobody really knows the extent of the State property and nobody could accurately predict what it might mean for overall income or how it would be broken down throughout the country. The figures vary enormously. I was not satisfied that the State should have no idea of the value of its property. That is not acceptable.

As Senator Cox said, I have moved to have all State property valued. When this is complete, I will know the rateable value of all State property. Dublin will be the major centre for State property. Senator Costello stated that local authorities could do with the extra money. There would be no extra money even if I were to allow State property to be fully valued today.

Would this not lead to greater income?

No, it would not. As I mentioned earlier, I am ensuring that the rates income will not increase because of this Bill. If I included all State property, it would have the effect of lowering the rates on everybody else. It would not increase the rates income to local authorities in Dublin, for example. Senator Costello said that we will widen the rates base and this is true. However, I intend that this will have the effect of lowering the rates for everybody else. The net effect will be neutral.

There would be greater income to the local authority from including Government buildings.

It would widen the rates base but it does not necessarily mean that there would be greater income. If we did not have a cap on it, it might mean that. This issue was raised by people throughout the country who did not want this Bill to be used as a vehicle for local authorities to gain a substantial increase in rates income. I am capping it in a way that, when the new valuation takes place, local authority income can only equate to the previous total rates intake plus a CPI increase. The Minister for the Environment and Local Government will implement that figure. I believe that Senator Doyle said it was 9%—

It is a flat rate at present.

—but it could be back to 3% or 4%. That is an important safeguard for businesses throughout the country.

Under the old system, through no fault of the commissioner of valuation or his officials, the ratepayer was regarded as being at the end of the process. I never liked this as the ratepayer is the most important person in the process and should be centrally involved in setting the rates. That is being done in this Bill. I have reversed the process and placed the ratepayer at the beginning.

Senator Cox mentioned the 28-day limit, but that is only for the appeal. The process will go on long before that when the ratepayer will be in contact with the valuation officer. They will have 28 days to go into the consultative phase if they disagree with the rateable valuation the office has set. In the event of such a disagreement, the rate payer will be able to put his or her valuation on a property, the two will meet and, I hope, resolve the matter. The ratepayer is very important in the whole process.

The three Senators who spoke are involved in local authorities and appreciate the complex calculations involved. Under the new system, if a property has a rental income of £100,000 that will be the basis of the rateable valuation. The local authority will have to adjust its current system. It could not be £30 or £40 in the pound, or even higher, as is the case in some authorities under the new system.

It is lower in others.

It could be down to £2, £3 or £10 in the pound under the new system. It will be more transparent and more easily understandable. A ratepayer will know what the person next door is paying. This information will be fully available so that people will not feel that they are paying much more than others. Some people wind up others by pretending that they are paying much less than they are.

The Senators raised the issue of winners and losers in the system. There have been major shifts especially in the five county borough cities and particularly in Dublin where there have been changes in the commerciality of properties and different streets have become fashionable for shopping. When the new valuation is done we will see an adjustment in that. Some people will see an increase in their rates, but they have probably been underpaying substantially for years. Those who have been unfortunate to have paid too much in rates for some years, based on the old inflexible system, will benefit under the new system. It will shake out reasonably fairly across the board.

I am happy to see the commissioner here today, which is indicative of the commitment the Valuation Office has to the Bill. The office has listened to what Senators and Deputies have had to say in order to understand their fears and concerns.

When the valuation of the country has been completed in five years, we will no longer be in a situation where it will take another 150 years for another valuation. We will continue to roll out the valuation in different areas so no area will have a gap between valuations of longer than ten years. This means we will have a fully functional, up to date, transparent and open system which will be to the benefit of ratepayers and everybody else.

The local authority in Galway is just coming to the end of its ten year period of being free of rates in the context of urban renewal, and I wonder how this will impact in terms of the capping being imposed.

It is an important point. In different local authority areas there will be certain exemptions with new properties coming into the system, a good example of which is that mentioned by the Senator. Local authorities should not suffer however. Such properties will be added to the rates base. I emphasise that overall the object of the Bill is not to create a windfall for local authorities. There is a difference between the valuation base and the rate of valuation authorities, namely, local authorities, and different issues arise.

Senators Cox and Joe Doyle mentioned exemptions for charity shops, an issue I closely examined. I met with representatives of charity shops and we went through the issue in detail. The administrative headquarters of charities are rates free. Rates will apply on a property where a commerical activity takes place. Even though the money collected on such properties is put to exceptionally good use, I cannot base rates on what money is used for. If I did, everybody would be presenting uses for the profits they make. I should also point out that some charity shops sell new and not just secondhand goods, while I know of a charity shop which sells secondhand goods but is competing with a secondhand shop which is 50 yards away. One must be fair and balanced and I think I have gone as far as I can and I have explained this to those involved in charity organisations. In fairness they recognise and accept that the Government's approach has been through the taxation system which we have substantially improved in the past few years in favour of charitable organisations. It is not the function of the valuation legislation to enhance their position, laudable as that might be.

Bed and breakfasts and apart-hotels, which were debated at length in the Dáil, were raised. Deputy Noel Ahern and others raised the issue of apart-hotels on Committee Stage in the Dáil. It is clear these properties are an adjunct or part of a hotel, and the Deputies asked if I could include them. I was happy to return on Report Stage, as Senator Doyle acknowledged, and make a provision to include apart-hotels. However, I am not including bed and breakfasts. There is much to be done in that context before we could apply rates, and I think the Minister for Tourism, Sport and Recreation is examining licensing, etc., which must be taken into account. His Department will be responsible for a range of issues.

Senator Doyle said payments to Dublin Corporation from the local government fund are falling behind. The local government fund has improved enormously and I do not think there is a member of a local authority who has not said to me that the past few years have been a boon for local authorities in terms of the money—

For some local authorities. A mechanism has now been put in place.

Dublin has done well. The economic income per capita for Dublin is 119%. The rest of the country would aspire to coming close to the great wealth that exists across the board here. On a serious note, the local government fund has fundamentally improved things and is a much better system than the rate support grant. The boom in the car industry and motor taxation has improved it.

Senator Costello raised the issue of State property. Effectively if I included State property, I would face a clawback from the local government fund, so there would have been no net gain. Because we do not know the value of the entire State property portfolio in terms of rate valuation it was hard to make a judgment call on it. I insisted on moving forward and allowing all State property to be valued. Inevitably this leads to possible obvious conclusions as to what may happen in the future, but we must prepare the ground to do it. Senator Costello spoke of an inherent contradiction, but the reason this is being done is that it has never been done before. At the end of the process, Senator Costello as a councillor will have a much stronger and more knowledgeable base on which to place his arguments when the information becomes available.

Do I take it the means and resources system under which the local government fund is distributed penalises the five borough councils, including Waterford, Galway and Dublin?

That is another argument.

An Leas-Chathaoirleach

The Minister without interruption. Senators may again contribute on Committee Stage.

The total rates base will be capped. Obviously if a business person is concerned about any of the services being offered they can get in touch with the Valuation Office to find out the position.

Senator Cox made an interesting point when she spoke about the potential use of IT. The most modern and up to date technology in the world will be used in this valuation process. Otherwise it would not be possible to do it in the timeframe set out. The point made by Senator Cox about IT, the website, etc., is not an issue for the Bill but I am sure it has been noted by the commissioner. I know the Valuation Office is very keen to be as open and transparent as possible and to get out the information required by people, and I think Senator Cox's suggestion is very good and could be taken up and examined.

Senator Costello spoke about the base for rateability. For the first time the Bill specifically clarifies properties which are rateable. This cannot be found in a specific piece of legislation. It will make the entire process more transparent. The Minister for the Environment and Local Government is also drafting legislation parallel to this Bill with regard to the rating authority and he may have views on exemptions or flexibilities which local authorities may require.

Senator Costello made a point about landlords. All rates legislation is based on the occupier or beneficiary of the property paying the rates.

That matter needs to be addressed.

That is what rates legislation is based on and it would be almost impossible to deal with it differently. The business which occupies the property makes the money.

The proprietor.

No, the occupier pays the rates. There is a difference between the two.

In terms of most businesses, the proprietor is the person—

If the proprietor is involved in the business being carried on in the property, obviously he or she will pay the rates. I wish to make it clear that the basis of the legislation is that the occupier pays the rates. Given my experience and knowledge of other jurisdictions, I believe what we are doing is correct.

I hope I have covered most of the issues raised by Senators. There will be an opportunity on Committee Stage to tease out some of the finer points in the Bill and I look forward to that debate.

Question put and agreed to.
Committee Stage ordered for Wednesday, 16 May 2001.
Sitting suspended at 4.45 p.m. and resumed at 6 p.m.