Collection levels have plummeted from 93pc to 76pc in just four years and businesses say they need a break from the tax, writes Colm Kelpie
WITH all the hullabaloo and controversy surrounding the household charge now transferring to the impending property tax, figures suggest that businesses are, not surprisingly, struggling with their own version of a property tax in commercial rates.
Understandably, all the debate has been focused on how already hard-pressed families will be squeezed even further to meet the cost of an annual levy on their homes, in addition to the quite considerable tax paid originally in stamp duty.
But during a recent meeting of the Oireachtas Public Accounts Committee, the secretary general of the Department of the Environment, Geraldine Tallon, revealed that the collection level of commercial rates had plummeted 17 percentage points in four years, from 93pc to 76pc.
Commercial rates are an annual property tax levied by local authorities on the occupiers of commercial and industrial property and are a significant contribution to the income of local authorities, accounting for about 30pc.
The tax is levied on the basis of valuations provided to the businesses by the Valuation Office. Although Ms Tallon's figures suggest the revenue stream from rates is falling short as a result of the economic tsunami sweeping across the country, Chambers Ireland and Dublin City Council both indicate that rate levels remain fairly stable.
In 2008, businesses in Dublin city paid out €296.6m, while last year that figure increased to €301.7m. The average rates charged per property in the capital are about €14,000.
Chambers Ireland argues business bosses are contributing their fair share in tough times, but they say enough is enough, and hard-pressed firms must be given a break.
"As local property taxes roll out, as further cost-saving measures are rolled out in the local government sector, we need targeted rate reductions for businesses in the domestic economy," a spokesman said.
"The reality is, the private sector is operating against a cost and revenue base of 2004, probably 2003 revenue levels for a large number of businesses.
"You have to ask the question, are the costs beyond their control? A lot's been done, but businesses would welcome more in that area."
Rates paid to county councils in 2006 was targeted to be almost €1bn, according to Chambers Ireland, compared with spending of almost €4.2bn. This year the target was estimated to have increased to €1.2bn, for spending worth about €4.1bn.
And there are some concerns that with potential revenue gaps over the failure, or refusal, by some households to pay the household charge, pressure could be heaped on businesses to stump up more.
"It's almost a cliche that business is the funder of last resort for local government historically and traditionally," the Chambers Ireland spokesman said.
"There have been profound cuts to the general purpose grant by central government to local authorities, the non national road allocations from the Department of Transport to local authorities have been cut pretty severely as well, so clearly a solid revenue base that is a broad base for local authorities is crucially important to help them to balance their books."
So what can be done?
Ms Tallon has said councils have been sympathetic.
"Local authorities have acted as things stand to contain and to seek to reduce costs for ratepayers over recent years," she told the Public Accounts Committee. "In a number of cases there have been actual reductions and in other cases the rates have been held steady."
A revaluation of rates has been under way throughout the country since 2005, which could result in a decrease for some, but spark a headache for others who find their rates bill increased.
The process has already been completed in a number of local authority areas including South Dublin County Council, Fingal County Council and Dun Laoghaire-Rathdown County Council. In Dublin City, the new rates regime will come into effect in January 2014.
Chartered Surveyor Brian Bagnall, of Bagnall Associates, said rates in some instances are doubling around the Georges Street and Exchequer Street areas, while Grafton Street will see hikes of about 30pc.
Consultations between authorities and surveyors are expected to take place in the early months of next year to iron out any problems, but Mr Bagnall expects about 50pc of cases to be appealed.
"Ultimately the rates increase will come off the rent. There'll be a lot of pain in that process, it's not a 'press the button on January 1 and your rates are up by €10,000 and your rent is down by €10,000'. It's the tenant ringing the landlord and saying I can't afford this," Mr Bagnall said.
While the timing in some cases is unfortunate, he says that despite the possible increase, the new system will be more transparent and streamlined, and ultimately easier for businesses to navigate. And he stresses that it will be revenue- neutral for Dublin City Council.
Aside from that, Chambers Ireland is pushing the Government for the completion of the proposed merger of Limerick City and Limerick County, confirmed by the Government in June of last year and expected to come into effect following the local elections in 2014.
Once implemented, it's expected that will lead to a significant cut for businesses in the area.
Environment Minister Phil Hogan claimed the move would bring rates in the city into line with the lower tariff in the county.
"We would like to see those being delivered upon in terms of a cut in rates to Limerick City Council businesses when they merge with the Limerick County Council rate base," Chambers Ireland said.
The body argues that Limerick sets the template for other mergers of local authorities around the country, including Tipperary North and South and potentially Waterford City and County.
So, while the voices of dissent concerning the property tax are being loudly heard, the issue of commercial rates is one to watch closely.