I thank you, a Leas-Chathaoirligh, for accepting this matter and I thank the Minister of State for coming into the House to hear it.
It has been a welcome development that in recent years the Government sought to reduce the tax burden on both the individual and on business. It has and will continue to provide an incentive for companies to develop and expand as well as providing individuals with an incentive to participate in the labour force. However, there is one area of business taxation that has been forgotten. It is an area where businesses have experienced increases over the past ten years averaging almost twice the rate of inflation. This area is commercial rates.
Commercial rates are one of the four main ways in which local government is funded, the others being income on goods and services, grants and subsidies and the local government fund. The whole issue of commercial rates takes on increasing importance following the recent publication of the pre-budget Estimates in which the allocation to the fund is €420 million. This represents a marginal increase in the fund for 2003 and in real terms, when inflation is taken into account, it could well be a reduction. Meanwhile, I understand that the local authority pay bill has increased by well in excess of 12% in 2002 alone and when benchmarking is taken into consideration, it is certain that the increase in the bill for 2003 will also be significant. I am sure the Minister of State is also aware that for 2003, in contrast to 2002, there are no specific allocations to local authorities to finance the salaries of elected members.
Taking these figures into account, will the Minister of State not agree that many local authorities will find themselves with deficits next year and many may be tempted to significantly increase their take from commercial rates to make up for any deficits in their budgets, particularly since the cap on increasing commercial rates has been removed? Further increases in commercial rates would have the effect of countering many of the gains businesses have made from tax cuts in many areas in recent years, which have been instrumental in the success of our economy over the past ten years.
I am sure the Minister of State is aware that many small and medium sized businesses, particularly those in rural Ireland, are already struggling with rising costs such as insurance and wages. Will he not agree that in the current climate, a rise in commercial rates could have serious implications for these hard pressed businesses and, for some, could be the last straw? Many small and medium sized enterprises, particularly in rural Ireland, are currently operating on very slim margins but they all have to pay their commercial rates bill regardless of whether they are in profit.
In light of this, would the Minister of State consider reviewing the allocation provided in the pre-budget Estimates for the local government fund with a view to increasing the allocation to reflect the rising costs local authorities face in the execution of their functions? If the Minister did that, local authorities would not be tempted to significantly increase their take from commercial rates to balance their books. It is essential that the allocation include appropriate remuneration for local authority elected members, who give so generously of their time, and for their sterling commitment to the effective representation of their constituents.
Those in the business community must pay their way and I am certain they do not object to paying. I am aware also that the private sector is only too aware of the changed economic circumstances in which we now find ourselves but since the abolition of domestic rates in 1978 and rates on agricultural land in 1984, business is the only sector that pays rates on its property to local authorities.
The total collected in commercial rates in 1984 was €182 million. That figure has risen to €746 million today. In other words, since becoming the sole contributing sector in 1984, the total take from the business community by local authorities has increased in excess of 400%. I am sure the Minister of State who, in the past, has proven himself to be pro-enterprise and understanding of the pressures under which small businesses throughout urban and especially rural Ireland operate, would consider that this level of increase is both excessive and unsustainable, particularly in the current economic climate when many firms are struggling with rising costs.
Business must also pay for water, disposal of commercial waste, charges linked to planning permission, the provision of parking and connection to water and sewerage schemes. These charges have increased almost exponentially.
There is a limit to the amount that any one sector of society should be expected to contribute. While we all understand that we are living in much tougher times when we all have to tighten our belts in the global economic downturn, perhaps the Minister would reconsider the decision to allocate little or no increase in the local government fund and ensure that local government is adequately funded so that struggling small and medium sized businesses, particularly in rural Ireland, will not have to bear the brunt of further rises in costs through increased commercial rates.