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Alternative Local Authority Revenues - Sinn Féin Átha Cliath Policy Document

29 November, 2004

Alternative Local Authority Revenues

Sinn Féin Átha Cliath Policy Document

The Hotel Bed Tax (Sometimes referred to in the United States as a Transient Occupancy Tax) is widely used in the United States, Canada and across a number of EU member states. Last year according to the American Hotel & Lodging Association the average Bed Tax rate across the United States was 12.4%. In California, where the average levy in 2003 was 10%, the charge raised more than $1 billion across the state.

The tax is also widely used in Europe. Below are a sample of levy rates in other major European cities. The method of raising revenue varies from a percentage rate of the overall hotel bill to a flat rate per person, per night.

Amsterdam 5%

Athens 2.16%

Brussels 10%

Paris 85c

Prague 48c

Vienna 2.8%

Zurich 1.05 Swiss Francs

(Figures provided by World Travel & Tourism Tax Policy Center's Tax Barometer, published in June 2002)

We welcome the support for this proposal from Dublin City Council in its submission to the Government's review of local Government funding where the Council proposed a Hotel Bed Tax of two Euros per night however we believe a rate calculated on a percentage basis would be a fairer system.

Internationally two key arguments are generally advanced in opposition to the notion of a Hotel Bed Tax. One is that the charges constitute taxation without representation in that tourists have no say in how, or whether, the rate is set. The second is the possibility of serious damage to the tourist industry.

In regard to the first argument tourists and other visitors to the city of Dublin make use of a variety of services provided by the local authority without any specific income being generated for the Council. One could make the same argument against many of the other charges imposed by airports for example.

As to the second it is our proposal to give the local authorities this power, but to leave it to the elected representatives to set a rate. Sinn Féin believes that local authorities can be entrusted with the responsibility of setting a fair rate that provides an income source for the Councils, but not set at so high a level that it would adversely discourage tourism. We also point to the fact that a number of European, American, Asian and African cities also use such a tax and that visitors to Dublin must enjoy their experience, requiring a high standard of infrastructure and service.

With figures from 2003 indicating over four and a half million tourist visits to Dublin and a hotel room capacity of 12,781 we believe those numbers would allow a rate that is comparatively low by European standards to be set but that would be a valuable source of revenue for Dublin City Council.

Rates on State-Occupied Property

Section 15 (3) of the Valuation Act of 2001 exempts State occupied property from rates:

"...a building or part of a building, land or a waterway or a harbour directly occupied by the State (including any land or building occupied by any Department or office of State, the Defence Forces or the Garda Síochána or used as a prison or place of detention), shall not be rateable."

Speaking in Leinster House on the 15th of February, 2001, Minister of State at the Department of Finance, Martin Cullen told the House:

"Making State-occupied property subject to rates would have to be on the basis of clawback measures from the local government fund being put in place to compensate for the significant rates income that certain local authorities would derive from State-occupied property."

However he went on to state:

"While exempting State-occupied property from rates, the Valuation Bill does, however, provide for the commissioner of valuation to value these properties in the first revaluation following enactment. This will allow for rates to be collected in respect of these properties should Government decide at a later date to pursue that course of action. The State should have a knowledge of the rateable base of all the property it owns and, thus, of what the rateable income of all its property throughout the country could be."

Therefore while the State has exempted itself from paying rates to local authorities, the buildings themselves are specified for valuation. Dublin City Council estimated that approximately €21 million would be payable by the State to the Council if State occupied properties were eligible for rates.

According to figures produced by IBEC in August of this year commercial enterprises consist of less than 10% of premises and the possibility of expanding the rates base must be seriously considered.

Sinn Féin has been to the forefront of highlighting the need for a massive review of the current system of loopholes and tax breaks, the majority of which the Government has failed to cost.

Much as we argue for those taxbreaks to be reviewed, their cost to the State assessed and their social or economic benefits outlined, we argue the same for a review of rates exemptions.

Separate to this review however must be the elimination of the State-occupied rate exemption without any attempt to clawback the funding from the local authority fund.

It should be noted however that the rate of valuation multiplier in Dublin City is one of the lowest in the state, ranked 25th out of 33 local authorities in 2004.

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