I wish to share my time with Deputy Creed.
Adjournment Debate. - Commercial Rate Increases.
Is that agreed? Agreed.
I am grateful for the opportunity to raise this important issue. Punitive, penal and anti-small business is how I would describe the commercial rate increases applied to all business, particularly those which have worked to develop and improve their trade. The new commercial rate will mean an increase of 200 per cent in some cases. Businesses which attempt to show initiative by upgrading premises and improving customer facilities and services are being penalised by vast rate increases.
Business people know they must pay rates. They do not mind paying balanced and fair rates but this is not happening. Instead, they are facing revaluations which are leading to substantially increased rate demands which are supposed to include council services, such as refuse collection, water supply and sewerage facilities. At least that is what the rate demand states.
However, the financial reality is that business people are not only paying vastly inflated rates, they are also paying twice for some services. For example, refuse collections have been privatised by most, if not all, local authorities and must be paid for separately. In addition to rates, rural businesses also receive demands for water charges. Is this fair? To compound matters, county councils are meeting to strike a rate. Most rate increases are between 4 per cent and 9 per cent while the rate of inflation is 1.2 per cent. How can businesses pay these enormous increases while employing the same number of people, selling to the same customer base, maintaining the same business level and selling the same products? How can increases of 200 per cent be explained or justified? What benchmark does the Commissioner in the Valuations Office use to arrive at these figures? These are the questions small businesses are asking. I have an example from one person in my home town who paid a rate of £1,300 last year. Following a revaluation this year the demand was £6,000. This company had made a profit of £1,000. The business cannot survive. This action is criminal.
Small businesses and industries are the social and economic backbone of the country. They have survived in times of recession, providing employment and essential services. Like the post offices and the Garda, they play vital roles in local communities and towns, often providing a service and credit line to customers that no multinational or faceless corporate body would ever provide. It is hard to believe that while we are encouraging people to start their own businesses we are also crippling businesses which attempt to improve or develop. It is ludicrous and demands immediate action, otherwise, we will soon have no small businesses.
If a small business wants to appeal a rate valuation increase it has to pay an extra £400. This too is ludicrous.
I thank Deputy Reynolds for sharing time on this important issue. It is coincidental that Sunday trading was discussed during Private Members' business. This Adjournment Matter is of concern to small businesses and is related to the big business versus small business agenda. This is not an issue about which Quinnsworth, Dunnes Stores or any of the large multiples often express concern, but it is an issue that strikes terror into the heart of small businesses when they see the officials from the Valuation Office touring the country revaluing property. Very often these revised valuations have little or no connection with the capacity of the business to generate income. This has to be a critical factor in any review by the Valuation Office.
I suggest some consideration be given to devolving the powers of the Valuation Office to local authorities to ensure there is some degree of local knowledge when revaluations are being carried out. There is a perception down the country that employees of the Valuation Office come from Dublin and do not have a clue about the valuation of properties in rural Ireland. There is a significant difference between property valuations in Dublin compared with those in rural Ireland.
Some mechanism has to be put in place whereby valuations imposed on properties have some connection to the capacity of businesses to repay the revised valuation. Otherwise we are forcing small businesses, which are the backbone of rural communities, out of business. I would like to hear the Minister's thinking on this issue. I feel there is some merit in devolving responsibility to local authorities thereby ensuring valuation has some relationship to the reality on the ground.
I thank Deputy Reynolds for raising this issue and Deputy Creed for contributing. I am delighted to come to the House and have the opportunity of allaying the concerns of Deputies at the effect of the rateable valuation on small businesses. As Deputies will be aware, the setting of rateable valuations is the responsibility of the Commissioner of Valuation. The commissioner and his staff in the Valuations Office are assigned the task of setting up and maintaining the valuation lists and these valuations are the basis on which local authorities assess the rates payable by the business community. Rates form a significant part of the funding of local authorities and the take in 1997 will be in the order of £360 million.
The commissioner is independent of the Minister for Finance, the rating authorities and rate payers in carrying out his statutory functions under the Valuation Acts. The underlying principle and cornerstone which guides the work of the commissioner and his staff is that there should be uniformity and equity between rateable valuations. This means that the occupier of a property should pay a comparable amount of rates to the occupier of a comparable property and the amount of rates should be fair and reasonable having regard to the benefits of occupation of the property. To achieve this objective, the Valuation Office assesses what is called the rateable valuation of the property. The rateable valuation is based on the net annual value, or in simpler terms, the rental value of the property.
To preserve the equity and uniformity I referred to, there is a provision in the Valuation Acts that the rating authority or the ratepayer may apply to have the rateable valuation of any property reassessed by the Valuation Office. This is called the annual revision process and it would be fair to say that it is availed of more often by the rating authority than by the ratepayer. Applications for revision would be made, for instance, to add new properties to the valuation list, to delete properties which have been demolished and to correct any valuation which was considered to be out of line with comparable properties. This could happen, for instance, because of market changes, renovations, extensions and so on. Approximately 12,000 valuations are reassessed under the revision process each year.
The revision cycle works as follows. When an application for a revision is received in the Valuation Office, a valuer is appointed to inspect the property, interview the occupier and research and analyse the relevant market rental information.
Then, taking all the factors which influence property value into account, the valuer puts a rateable valuation on the property. Lists of revised valuations are published four times a year in February, May, August and November. The main publication is in November and the process of striking the rate in the pound by the relevant rating authority follows this publication. Where a ratepayer considers the valuation assessment on his or her premises to be excessive, there is a right of appeal.
In the first instance, the ratepayer makes the appeal to the Commissioner of Valuation. A valuer, other than the valuer who handled the revision, known as an appeal valuer, is appointed to investigate the ratepayer's appeal, inspect the premises, consult with the ratepayer and report back to the commissioner. The commissioner considers the appeal valuer's report and may raise, lower or confirm the valuation. The rating authority has a similar right of appeal to the commissioner.
Where a ratepayer or rating authority is dissatisfied with the commissioner's decision on the first appeal, there is a further right of appeal to the independent Valuation Tribunal. The members of the tribunal are appointed by the Minister for Finance and each appeal is heard and decided by three members. At the tribunal, both sides, the ratepayer and the appeal valuer from the Valuation Office, are given the opportunity to present written and oral evidence on their valuation. The tribunal must issue a written judgment setting out the reasons for their decision. The decision of the tribunal is final in relation to the amount of a valuation but there is a further right of appeal to the High Court and ultimately to the Supreme Court on points of law.
I hope this outline of the independent status and functions of the Commissioner of Valuation and of the valuation revision and appeal cycle will reassure Deputies that the system is fair and accessible and that there are ample appeal provisions to protect the interests of traders and business people. I would like to finish by saying that what the Deputy is referring to is the annual revision process undertaken by the Valuation Office on certain properties at the request of ratepayers or the local authorities and not a revaluation.
A revaluation would entail the updating, on a systematic basis, of the valuation of every business property in the State. The draft heads of a valuation Bill, providing for such a revaluation, are currently at an advanced stage of preparation in the Department of Finance, a role in which I am directly involved. As soon as consideration of the draft heads are complete it will be necessary to obtain the views of other Departments. As the proposed Bill is intended to update and overhaul the valuation code, the process of consultation with other Departments is likely to be complex and detailed. As soon as the consultation process is complete and its results taken on board, it is intended to bring a memorandum to the Government.
I repeat, the Valuation Office has been engaged in the routine annual revision programme, a programme designed to ensure uniformity and equity between ratepayers, nothing else.