2026-05-21

In 1826, 200 years ago, King George IV decided to sign into the law the government valuation of Ireland Act. That set in train the process of commercial rates. This was the way in which local government was funded. A decision was taken to levy rates on all properties. Those rates were determined based on the floor space of properties. In 1979, commercial rates were removed from domestic properties and, following a court challenge in 1984, they were also removed from agricultural properties. We are still in a situation whereby one of the main ways in which local government in Ireland is funded, to the tune of some €1.5 billion per year, is through commercial rates. This is a system that has existed for 200 years, in spite of all the changes that have happened in business since. The Minister of State knows how enterprise has transformed in that time, particularly with new technology. For example, in my home town of Gorey, there is an Eason and a Bookstation shop, which are both good book shops. They pay commercial rates to Wexford County Council but they compete against the likes of Amazon, the world’s biggest book seller, which does not pay any commercial rates because it does not have a main street presence. Those same main street retailers - it applies to every other sector as well - are also expected to contribute to our communities and sponsor local events, which they all do. Similarly, cafés and restaurants in the hospitality sector rely on large amounts of floor space. The bigger the restaurant, however, the higher the commercial rates. It is not based on turnover. Many forms of taxation work on the basis of income levels or turnover. I know the Minister has looked for a review around the functioning of local government more generally but this issue relates specifically to how we fund local government. I totally accept this is a political hot potato but in the modern world in which we live, we continue to decide a sizeable junk of local government funding on the basis of the floor size of a particular premise. We should also bear in mind that constituencies offices of TDs are exempt from commercial rates. From talking to businesses, I know they view this as exceptionally unfair. During Covid, we rightly took the decision to help businesses by suspending the payment of commercial rates. In order to support our main street businesses that we all enjoy and to make it a level playing field with the online world, can we move to a situation where we either access local taxation based on turnover or find a more appropriate way of funding local government? It is bizarre that a system that is nearly 200 years old stills underpins the funding system we use. I have raised this issue on a number of occasions. In order to give businesses a break, I urge the Minister of State to move away from the current commercial rates system.

I thank the Deputy for raising this matter and giving me the opportunity to clarify the position regarding the basis for the assessment of rateable property for commercial rates purposes and the role of Tailte Éireann in that regard. I am taking this Topical Issue on behalf of the Minister for Housing, Local Government and Heritage, Deputy James Browne. Tailte Éireann is an independent Government agency that provides a property registration system, property valuation service and national mapping and surveying infrastructure for the State. Tailte Éireann is independent in the exercise of its valuation functions under the Valuation Act 2001, as amended. The Minister for Housing, Local Government and Heritage, Deputy Browne, and the Department do not have any function in decisions in this regard. Tailte Éireann has overall responsibility under the Act for the maintenance of all valuation lists used by local authorities in the calculation of rates liability. I thank Deputy Byrne for the information he provided. I did not realise that it was King George. Am I correct that he said it was King George?

Yes. It was King George IV.

It was King George IV who introduced the valuations in Ireland 200 years ago. There has been a lot of change on the island of Ireland. Maybe we need to look at the rateable valuation of all property a bit more closely. A valuation for commercial rates purposes is arrived at by estimating the net annual valuation, NAV, of a property, at a specified valuation date during the revaluation of a local authority area. The term "net annual value" has a legal definition and is set out in section 48 of the Act: The rent for which, one year with another, the property might, in its actual state, be reasonably expected to let from year to year, on the assumption that the probable average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that state, and all rates and other taxes payable in respect of the property, are borne by the tenant. This definition of NAV is applied to all rateable properties across the State. The assessment of the NAV of any property is grounded in analysis of the available market evidence at the valuation date and relative to other properties on the list in the relevant rating authority area. Estimating the NAV of a rateable property, including determining the appropriate valuation methodology, is an evidence-based exercise. The floor area of a property is only one of many factors considered when arriving at a net annual value. During a revaluation, Tailte Éireann analyses relevant market rental transactions for all rateable properties in accordance with the legislation and well-established valuation principles as well as case law arising from the independent valuation tribunal and the higher courts. Various methodologies may be used in estimating the NAV, which is the rental value of a property. The most common methodology used is direct comparison with other similar properties which, by necessity, includes consideration of the floor areas. In some instances, the receipts and expenditure method of valuation, which relates to the turnover - or potential turnover - generated by a trading property, is particularly relevant in the assessment of NAV. In other cases particularly for highly specialised properties, a construction cost-based approach in accordance with the provisions of section 50 of the Act may be employed. For the majority of properties such as retail units, offices and industrial units, rental evidence at or close to the valuation date is collected and analysed to establish the appropriate valuation levels to be applied on a rate per square metre basis to similarly circumstanced properties. The rates have been evaluated since 2001. I have heard it myself on the ground that a lot of businesses are quite unsatisfied and that it should perhaps be on turnover. It is a system that perhaps need to be looked at again.

The response provided by the Department sets out the process by which it is carried out. I have no question about the professionalism of the public servants who carry it out but it is the principle. The Minister of State made the point about similarly sized businesses with regard to floor space. A bookshop in Gorey, Arklow, Wexford or Sligo is likely to be assessed in broadly the same way but the problem is their competition is the likes of Amazon and online sellers which are not subject to commercial rates. If we want to protect our main street business, which we all do, we have to have a level playing field. When it comes to infrastructure, for example, telecoms towers, rates are often based on turnover of the companies. I ask the Minister of State to take it back to the Minister. I feel passionately about this. The Minister of State knows how important main street shops and businesses are. This is an unfair cost on them. It is not that they are opposed to contributing but why are they put at a disadvantage when it comes to an online space? I could operate a multi-million euro businesses just from my phone and I would not need any floor space but if someone operates in our communities, providing vital services in many cases, it is ridiculous that the tax they have to pay is based on floor space. That was fine 200 years ago; it is certainly not in the case of a modern economy.

To clarify the position, regarding the basis for assessment of property for commercial rates, I am taking this Topical Issue on behalf of the Minister, Deputy James Browne, the Minister for Housing, Local Government and Heritage. While it is not my area, there are areas on which I agree with the Deputy. A lot has been done in updating but perhaps a lot more needs to be done because we are online now with Amazon, etc. The main street needs every support it can get. I was a retailer once. I had two or three retail businesses. Rates were always an issue along with many others. The assessment of NAV is grounded in analysis of the available market evidence at the valuation date. For the majority of properties such as retail units, offices and industrial units, rental evidence at or close to the valuation date is collected and analysed. While it is the Minister's Department, there is a case to have a look at how we rate properties. I was canvassing for the by-election in Connemara in the Gaeltacht area. It came up in a shop and we discussed it. They felt turnover might be better. I speak as an ex-retailer not a politician or Minister of State. I value the Deputy's views. Perhaps it is time to have that discussion again.

I welcome some Polish friends who are in the Gallery with the chargé d'affaires, Mr. Artur Michalski. You are most welcome. It is lovely to have you here.