Tuesday, 8th March 2005

RADICAL OVERHAUL NEEDED IN LOCAL GOVERNMENT FUNDING

Tourism Chief Warns

Local authority rates continue to be the most regressive form of business taxation, and require an urgent overhaul by the Government in order to create a fairer business environment, over 400 delegates were told at the Irish Hotels Federation (IHF) 67th Annual Conference in Cork today. The current system of rates, rising at an average of 6% per annum, places an unfair burden on the commercial sector, with 40% of the ˆ3.4 billion required by local authorities annually contributed by commercial businesses. It is high time for Government to introduce a more equitable system of funding Local Authorities and stop penalising businesses by calculating contributions based not on the profitability of the business, but on the size of its property, the Federation states.

Richard Bourke, IHF President, describes the current system as a crippling blockage to the competitiveness of Ireland’s tourism sector. The rates system should be abolished, he maintains, and replaced with a local income tax, which would entail increasing the current corporation tax rate from 10% to 12.25%. In addition, 2% from the current national standard income tax rate and 4% from the higher income tax rate should be ring-fenced for local authority funding.

Specific measures proposed by the IHF are:

• A local income tax based on profitability as opposed to property valuations to pay for the provision of community based services such as parks, libraries, street cleaning, local contribution to road maintenance;
• User charges for services for both businesses and households where the levels of use can be determined such as water provision, waste collection, planning fees;
• Central government funding for social services specifically social housing, assistance to elderly and disabled people to adapt their houses.

“The current system of rates involves a fixed charge, incurred annually, that is based on notional property values and bears no relationship to the size or scale of the business or its ability to pay. For example, a small accountancy or legal firm could generate over ˆ1 million in fees from a small office, whereas a 40-bedroom hotel, located in a much larger building, might generate a similar income, but yet it will pay substantially more in rates. In addition the burden of rates is disproportional on businesses such as hotels and guesthouses where, in many cases, city or town centre locations are required, but where revenues per square metre are inferior to other businesses,” says Mr Bourke.

The recent increase of 8% in rates by Galway County Council is three times the current rate of inflation and comes on top of a 33% increase in rates in the County over the past three years. According to the IHF there is no relationship between this increase and the level of service provided by the County Council, indeed the services provided to tourism in Galway are considered extremely poor.

“Galway is just one example of the lack of understanding shown by the local authority of the commercial reality of doing business in a highly competitive industry. In a climate where the finger is continually pointed at the tourism sector for allegedly ‘ripping off’ its customers, the Government must take some responsibility for the cost burden that it places on our sector, which in turn impacts on our ability to remain competitive,” states Mr Bourke.

“Tourism is Ireland’s largest indigenous industry, supporting some 150,000 jobs, almost 60,000 of which are in the hotel and guesthouse sector. Our industry is asking the Minister for Environment, Heritage and Local Government to consider a number of urgent reforms to the current system of rates to fund the local authorities. The commercial sector cannot continue to foot the bill while the public sector remains protected,” Richard Bourke concluded.

FOR FURTHER INFORMATION:

Siobhan Molloy / Niamh Boylan Tel: 01 6760168 (Dublin office)
Weber Shandwick FCC Mobiles: 086 8175066 / 086 3809191