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Dáil Éireann díospóireacht -
Tuesday, 21 May 1985

Vol. 358 No. 8

Valuation Bill, 1985: Second Stage.

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

The main purpose of this Bill is to clarify and reinforce some provisions in rating valuation law and to prevent the erosion of the valuation base with the consequent loss of revenue by local authorities.

The principal provision arises from section 7 of the Annual Revision of Rateable Property (Ireland) Amendment Act, 1860, which stipulates that, in valuing any mill, factory or other industrial building, the Commissioner of Valuation shall not take account of the value of any machinery, except such as is used for the production of motive power. In recent times, particularly with the increasing automation of manufacturing, there have been more and more frequent attempts to have many items of fixed plant associated with a manufacturing process treated as machinery. Examples of plant which have been called into question are industrial silos, brewery vats and bakery ovens.

The Commissioner of Valuation has consistently valued such plant, but in a number of important cases the courts have found in favour of the appellants, that is, to the effect that the items in question were machinery. It is proposed, therefore, to amend section 7 in order to remove any doubts and to confirm the traditional practice. The new section 7 provides that plant in the nature of a permanent fixture shall be valued and the categories are listed at section 8.

The Bill has a similar provision relating to certain types of fixed property other than plant which hitherto have been valued in accordance with the Valuation Acts, though not specifically referred to in that legislation. Some of these types of property did not exist or were not of practical significance when the code was established in the last century. Car parks are a good example. The categories of fixed property involved are listed in the schedule to section 3.

The Bill, in addition, provides statutory authority for the long established practice of fixing valuations of rateable hereditaments by reference to the valuation of similar hereditaments already valued. This practice is necessary because the Valuation (Ireland) Act, 1852, prescribes that the valuation of buildings shall be based upon an estimate of the net annual letting value. Letting values have undergone radical changes in the course of time due to inflation and to other factors, but in the absence of a general revaluation the changes have not been reflected in property valuations generally.

Accordingly, to prevent distortions and inequities arising as between old and new valuations and to preserve relativities, the practice has been to determine the rateable valuation by reducing the estimated current letting value to a figure consistent with the valuation of comparable properties already rated. This is referred to as "maintaining the tone of the valuation list", that is, it preserves a reasonable relationship between valuations within and between rating areas. I have decided to avail of the present Bill to put the practice on a formal legal basis.

I want to assure the House that the Bill does not represent any change in valuation or rating policy. It does not seek to extend the type of properties to be valued and rated. On the contrary, it will merely help to preserve the traditional valuation base and remove doubts about the interpretation of some existing provisions.

By way of some further background explanation it might be useful if I said a brief word about some recent court rulings in the matter. Difficulties in the interpretation of section 7 of the Annual Revision of Rateable Property (Ireland) Amendment Act, 1860 — to which I have referred — have arisen because the word "machinery" is not defined in the Act, nor is it defined anywhere else in the valuation code. The variety of types of machinery one may now expect to find in a factory as well as variations in their adaptation, situation or use may render definition almost impossible. In the late fifties legal challenges to the rateability of certain plant began to emerge on the basis of the ambiguity of the meaning of the word "machinery".

The general conclusion of the courts in cases heard to date is that any plant, tank or vessel to which or in which force is applied in any way in the process of manufacture is a machine and accordingly not rateable.

Plant, tank or what?

——or vessel. The conclusion is, in some cases, that not only mechanical movement, as in, for example, a rotary kiln but also the pumping of air or gas, or the addition of chemicals, can turn tanks or vessels, even where they are linked into a building, into machinery thus resulting in a situation in which they are regarded as not being rateable.

Following earlier court decisions the number of appeals in matters of this kind has increased very substantially in recent years. There are quite a number of cases now under appeal. The interpretation adopted by the courts has begun to create a substantial loss of rates income to local authorities and, in some cases, local authorities have been required to refund rates already collected. All local authorities are potentially affected. A continuation of that situation would result in a further erosion of their financial base, entailing, in some cases, considerable losses of revenue. The corrective measures proposed in this Bill are urgently required in order to prevent this deterioration in local authority finances.

I might make a brief reference to land used for sporting purposes. The Bill maintains the status quo as far as sports grounds are concerned, that is that land used for such purposes as football, golf, horse racing and so on — because it has always been valued as agricultural land — is not subject to the payment of rates. Therefore the Bill specifically provides for the exclusion of land developed for sport from the categories of property to which the provisions of the Valuation Acts will now apply. In this way the status quo with regard to the payment of rates by sports clubs will be maintained. Of course most sports fields were not subject to rates because their valuations were low enough to qualify for relief of rates through the agricultural grant. The rateability of sports buildings, for example, dressing rooms, club houses and so on, will not be affected by the provisions of this Bill since such buildings will continue to be, as they always have been, liable to rates.

I commend the Bill to the House.

I can appreciate that an Act passed in 1860 and which used a word with such wide connotations as "machinery" might need amending in 1985. I take the Minister's point when he says that there has been such development in technology over the last 20 years or so that such definition is needed more and more.

In his speech the Minister mentioned basic objects like industrial silos, brewery vats and bakery ovens being called into question, as to whether they should be included for valuation purposes. I accept that there is a need for this amendment.

The Minister went on to say:

The Bill has a similar provision relating to certain types of fixed property other than plant which hitherto have been valued in accordance with the Valuation Acts though not specifically referred to in that legislation.

He cites car parks as a good example. I have not got a copy of the Schedule here. I want to ask the Minister if car parks are included in the Schedule for valuation purposes in the future. He might tell me when replying.

The Minister then says:

Letting values have undergone radical changes in the course of time due to inflation and to other factors but, in the absence of a general revaluation the changes have not been reflected in property valuations generally.

Which is self-evident. Throughout the 19th and so far in the 20th century we can see the seesaw of inflation. If one looked at the period between the two World Wars, the 1914-18 and the 1939-45, one would have seen that there was very little inflation, but then there was also very little employment, very little of anything else at that time. I always think that the people who push the idea that a cure for inflation constitutes a cure for an ill economy are barking up the wrong tree.

The Minister talks about the preservation of old and new valuations and the preservation of relativities. I recall having a conversation with the late Mr. Sean McEntee, Minister for Local Government in the thirties, when he set about a revaluation in the city of Dublin. It was his theory — and he proved it to my satisfaction anyway — that streets such as O'Connell Street which was then, and I suppose still is, the commercial powerhouse of the city, were valued at a very low rate and he was convinced that the valuation should be much higher. Compared with the valuation of businesses on the perimeter of the city as it was at that time — of course a much smaller area covered than the city covers now — he regarded the relativities as being out of kilter and, while he remained in that Department, he pushed very much for a revision.

I may be mistaken in the portfolio but he was succeeded by Mr. Seán T. O'Kelly who did not go ahead with the revaluation which he had intended to do. I can understand how business concerns would look at every loophole in order to escape high rates. Therefore I can understand that there may have been many court cases with the intention of excluding what is of substantial valuation and relieving the burden of rates.

The Minister gave us a sketch of court rulings necessitated by the vagueness of the use of the word "machinery" in section 7 of the 1860 Act. The word "machinery" is an interesting one and is derived from the Greek word for a device —mechane. I should like to see someone as a deus ex machina rather than myself who did not expect to be taking this Bill. The Minister referred to a plant, tank or vessel which was subjected to force. Did the Minister use the word “force”?

To which or in which force was applied.

I gathered that was equal to machinery.

That is the view of the court.

Certainly it shows the danger of leaving to the courts a precise definition of what is imprecisely defined in an Act.

I am glad the Minister said that land used for sports and so on which was formerly valued as agricultural land is being excluded from rating obligations. This will be applauded and approved by the House. The Minister used the beautiful, subtle phrase "maintaining the tone of the valuation list".

A term of art.

It is beautifully done. I do not know whether the legal people are responsible for it.

The trouble is that it is a discordant tone.

Not in the context here. I mentioned that certain people had made studies of the relativities as between centre city areas of Dublin, very rich commercial centres, and less rich areas in the same city. I do not think one could refer in that context to the maintenance of the tone of a valuation list. I should like a little expansion on that point. Does it refer in any way to what I have been talking about? The definition is that it preserves a reasonable relationship between valuations within and between rating areas. If one is assessing valuation with reference to potential for making profit for its owners in trading rather than leasing or letting, that would require a great deal of commercial and legal knowledge and a long and painstaking study of valuations in any area. As far as I remember, in the Six Counties of northeast Ireland there was a full scale revaluation some time ago which brought about major changes in the valuation system there.

It is regrettable that this Bill does not make any major changes in the valuation system since that whole system could do with a major reappraisal and revamp. The system as we inherited it and continued it is tired and worn out and has been operating in an entirely artificial way. This Bill is designed to prop it up for a litle longer. The system is riddled with inconsistencies and artificialities. After all this time we should really devise a more consistent and better system of raising local taxation.

The notion that valuation is referable to the letting value of the property concerned is a complete fiction and nonsense. The figures that apply bear no relationship to the letting value. They are done on a comparison basis "maintaining the tone of the valuation list". I also noted that phrase with interest. Some notional basis is taken and then the tone is maintained by making a comparison of one with another. More often than not years, if not decades, elapse between revaluations when the figures are revised and updated. If there is to be any sense in the system they have to be revised on a regular basis, possibly every year or two years, but the Valuation Office do not have the staff for that kind of thing.

There are many glaring examples of modern property which is given a high valuation whereas a comparable building erected years ago has a lower valuation, even though the building might be finer and have a higher letting value. If the system is to be retained, at least the fictional element ought to be dispensed with. There should be a revaluation based on the letting value, if that is what the Act specifies, rather than this nonsense of taking a range of figures below the letting value and maintaining the tone of the valuation list. I understand that in some parts of the UK where they did a revamp at some stage they used this system. The valuation figures they use now accord with the letting values. At least that makes more sense. Obviously, when one does that one has to adjust the rating figure to take account of that increased figure and, instead of having rates of £10 in the pound or £14 in the pound, such as we have, the rate might be 50p in the pound or 90p in the pound. At least that would bring some sense and reason into this rather than maintaining this artificiality with great laboriousnes and to very little purpose at all.

One would have to wonder whether the whole concept of raising local taxation through this method is not really past it. The time has come for a more radical alteration in the approach to the question of raising finance for local authorities rather than through this method. The present system was a carry on of the old poor law system. I believe that originally the valuations were called poor law valuations. They had their role to play over the years but now more modern thinking in the western democracy tends to go away from the idea of a fixed notional value attached to each piece of property. I understand that in the United States local authorities raise their finances by means of some form of local income tax or VAT. I have not carried out a detailed study of how well that works — I do not have the resources to do that — but it sounds to me like a more modern approach to the concept of raising finances by local authorities. I do not deny that that system might present some difficulties. Certainly, it would require great care in its organisation.

I note that the most recent report of the Commission on Taxation which landed on my desk today gave the idea of a local taxation the thumbs down. I have not studied that report in great detail but I have some reservations about that finding because I am aware that a local income tax or VAT system operates widely in the US and, I believe, in some European countries. There must be a great deal of merit in it. It has one decided advantage in that at least it is referable to the ability of the concern or undertaking to pay. If they have set up in a factory or premises and are doing well they will pay more and if they are keeping a workforce going but are doing poorly they will have less, or nothing, to pay under this system. One will balance out the other.

To put a fixed rate, irrespective of the product of the premises concerned, can operate as a hardship on some businesses, and, in some cases, may cause job losses.

Like the tax on farmers.

We will talk about that another day in another context. It is fairer if a business that is doing well pays a higher contribution while one that is not doing so well but yet is performing a very useful role in the community by providing useful employment pays less so as to be able to continue. That might not be possible under the present regime.

I am glad the question of car parks is dealt with in the Bill. It is very appropriate that taxation should be raised from that source. It is a very remunerative business and one that is acquiring increased importance. I must express some disappointment at the fact that there seems to be a tendency in Dublin to farm out the car parks to foreign investors and leave them to be run by companies from the UK or elsewhere. I fail to see why Dublin Corporation, a big culprit in this regard, should be so quick and eager to farm out the many car parks they have. Surely it would not stretch the imagination for them to be able to run those parks. At least the Bill has a provision that some contribution will be forthcoming from that source towards corporation and local authority funds.

My main criticism is that the old valuation system is tired. I have held that view for some time. The system is artificial and has outlived its usefulness. The time has come for us to revamp the system and devise a new method, possibly through a local income tax or VAT system. The sooner we get rid of the fictionalised, inconsistent and unfair system that operates at present the better. The Bill refers to maintaining the tone of the valuation system. I interjected when Deputy Wilson was contributing to say that it was a discordant tone. The point I was trying to make was that there is no consistency there. It is completely inconsistent and one would be hard put to find any kind of sensible tone running through it. In fact, that was the whole basis of the unconstitutional finding as far as farm valuations were concerned. The same inconsistency that was found by the courts in that instance would apply, if it was examined, to industrial premises. I am not inviting anyone to take a constitutional action but that finding highlights the very unwieldy nature of the whole system. It illustrates the fact that we will have to look — I hope it will not be too long — at some new arrangement for a more consistent system.

I have to agree with the sentiments expressed by Deputy Taylor, in that simplification has not been achieved. If there could be any comparison drawn between it and the property laws we have, it is that we seem to believe that one should not interfere with a tradition that has been build up over the centuries in spite of the fact that it may be cumbersome, outdated, complicated, costly, and totally musunderstood by all, except by experts. We do not seem to be able to reform the areas that need to be changed. I have no qualms about taking what the Minister has said at face value but the Bill fails in that we have not taken advantage of the opportunity presented to us by introducing new legislation that deals with an outdated area. It would be fine if we could unravel this legislation and lay it out for the 20th century, or the eighties at least.

I am not so sure that it is a good idea to put this in statutory form considering that it seems to be very theoretical in certain areas. It would be far better to simplify it and to make sure that it works before putting it into statute form. We are dealing here mainly with industrial rateable valuations which are unfamiliar to the ordinary member of the public and the implications of which are something many people do not worry about. Nonetheless I would like to see some figures, on Committee Stage, to see what kind of revenue is obtained from industrial rateable valuations and what service is provided to manufacturers for the rates paid.

I fail to understand sections 3 and 8. The definitions between the two areas are left suitably vague so that it is entirely up to the Minister as in section 8 (2) where by order he may "add to that Schedule a category of plant specified in the order". Section 8 tries to define the schedules but it does not really do so. It refers to "constructions affixed to the premises comprising a mill, manufactory or building". It is not right for a local authority to stick a rate on to everything put up inside a business premises. Specific reference is made to ponds and reservoirs. Twice during the last ten years I have witnessed the dismantling of premises with both of those items included, one being the dismantling of Killeen Paper Mills which had been in existence since 1775 and which employed 750 workers when it finally closed down ten years ago. When a paper mill is built it includes excavating the ground and laying down the base for a pond. I do not see why a manufacturer has to be penalised while providing machinery which will help to produce jobs. Both Killeen Paper Mills and Clondalkin Paper Mills, soon to be reopened, had ponds attached to them. The pond in Clondalkin was a great amenity, an amenity which was not being provided by the local authority. It was ridiculous to strike a rate on that pond. The pond was stocked and the locals could fish in it.

The explanatory memorandum does not seem to explain the Bill which follows. It is not a good idea to introduce legislation which is not easily understood and about which there is a feeling of disagreement. This Bill is archaic and it does not work very well. During Committee Stage, if people were to give the time to it, it could be easily demonstrated that it does not work very well but I am certain that people will not bother going through it because it is cumbersome and uninteresting. As Members of Parliament we should feel it incumbent on us to make abundantly clear what we are doing because at the end of the day we will have to vote on it. Would we vote on something that we do not understand, that does not really fit the legislation which we are trying to update and which has been on the books for the last 100 years or so? We should have some definitive account of the workings of this proposed legislation brought to the attention of Members of the House so that we could get the gist of it and check it out against whatever is available to us in the Library or in other countries. In a new country like Australia they have no such complications in their property law or valuations. They have not the huge body of land law that we have. One can go into a real estate agent's office and buy a property and get it registered without complication. We seem to be stuck with this outdated legislation.

The IDA, the Department of Finance and the Government generally have a policy over the last 20 years of trying to encourage business and industry and we have deliberately sacrificed revenue to get employment, in the long term hope of building up our own technology and expertise so that we can set up our own businesses. It is not satisfactory that local authorities can add indeterminate amounts of rates to premises or appendages to premises or things like ponds, silos and fixed machinery in order to gain revenue. What do the local authorities give in return for these rates? For water rates one gets a service but for industrial rates, firms get nothing in return for money they pay out for something they build and maintain themselves. Why they have to get rates for the containment of a substance, for the transmission of a substance or of electric current, I fail to see. I am concerned about some Acts which have come through the House recently and the bureaucratising of what has been up to now a freedom where human contact usually sorts out problems — for example, the Bill that was slipped through the House recently in ten minutes enabling the ESB to put pylons and poles on people's lands without having formally to seek permission and so that there would be no objections. This is not the right way to go about it.

I see no mention in the Bill of a method of appeal or of what happens. Nothing happens, of course, if the Minister makes an order. While it is often necessary for the Minister to be able to make orders, sometimes he can be given a power of which we will not know the effect until later on. I do not intend disrespect when I say that Departments sometimes decide that something should certainly be rated. Business people sometimes suffer the frustration of having a very high rate struck on a building, part of a building or on their land and often there is very little they can do about it except appeal. A facility should be available for a person to appeal such a rate to some body who will at least have an understanding of the difficulty the appellant is in. That does not seem to be available in a great deal of legislation and, when we bring in legislation, that should be borne in mind.

This Bill is like many other Bills which seem to contain standard criteria. These seem to be a format in practically every Bill. That kind of format has not changed since I came into this House, and I am three years here this week. Someone should have a look again at a procedure of drafting legislation such as this. It is very tempting always to go to the Library or to precedents for the format and to put it in. As Deputy Taylor said, we have been doing this for so long and so regularly that it is automatic. The windows need to be opened and the cobwebs swept away. Perhaps during the summer officials from different Departments should take a trip to other countries and examine the attitudes around the world which might help to untie us from the procedure which has been adopted traditionally in Britain over the years. We seem to copy everything from them.

If it happens, do that.

It would do them no harm and I would be glad to see them doing it. I am not a begrudger. Regarding the car park, which the Deputy mentioned, Dublin Corporation always seems to give their car parks to British companies. I was very disappointed to find that no Irish businessmen are capable of running the car parks in Dublin. When I was a student I was going to apply——

Or the corporation. It is as Deputy Taylor said.

That is what I was saying.

It is such a complex operation, after all.

When I was a student here I thought that I would apply to the corporation, because they were putting in the first of these car parks, to run the car parks and I would have been able to do it in my spare time with some other students. But we must go abroad to get a British company to run a lot that has been demolished a few months previously and which will lie flat for a couple of years and they will put up a chicken house with an Irishman in it from 8 a.m. to midnight and collect money from him and stamp a ticket. We cannot do that. We cannot even give so much out to ourselves.

I do not want to go too far away from the subject. We have been caught on the wrong foot with this kind of Bill. It is customary to bring Bills into the House and to expect — I know that is not the intention of the Minister——

It was circulated in the middle of March.

I have had it on my file since then but the Government have been working so hard of late that I have ten or 15 Bills lined up for research.

We will be moving into Private Members' Time soon.

Whether he will be able to continue on it——

While we have the opportunity and while we are able to produce this legislation and different ministerial Departments are working at full belt pouring out legislation, this is an appropriate time to look at it. I have asked the Minister to tell us what happens in the event of an appeal. I would like him——

We are all becoming polymathic on this side using devices.

——on Committee Stage to give us an indication of the amount of revenue that is collected in the different local authorities from industries. I would like to see what kind of things they get back for that.

The new section 7 will need evaluation to decide on its effect. That section was the most contentious part of previous legislation. It does not really specify the categories in enough detail and it is not ready in its present form to take on the developments and the technology of the eighties. I do not know whether the intention is or whether it is desirable to give a blanket to one Department to enable them to cause any category they like of building——

The Minister, not the Department.

I beg the Minister's pardon, the Minister to cause any category he likes of land or buildings to be rated. Therefore, while I have no objection to him being able to make an order on it, I am not sure whether he wants to do that. I would like to know what benefit the manufactory——

The Deputy is depending on the yellow press now, I see.

——this beautiful nineteenth century word — get from the valuation. This could be more lively legislation and more exciting. It could be better defined.

It is difficult to get much excitment out of a valuation.

I do not see why not. If you are in the awful position of having to pay out rates——

That is the exciting part.

There is no mention here of them but I am sure they are very hefty. In the commercial area as opposed to the residential area they are very hefty and can be very critical.

No wonder barristers are so expensive.

Debate adjourned.
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