THE STORY OF Dublin’s commercial rates got a new chapter this week when Dublin City Council increased them by almost 3%, to the dismay of some business groups around the city.
The decision came on Monday night, when Dublin City councillors held their budget meeting for 2020, with price hikes largely attributed to a shortfall in income rates on Irish water properties.
Business groups such as the Dublin Chamber of Commerce, the Restaurants Association of Ireland (RAI) and the Irish Hotels Federation (IHF) hit out at the decision as taking an unnecessary toll on businesses in the city.
“It’s frustrating to see businesses again left to pick up the shortfall in the budget. There are other mechanisms that the councillors could have looked to utilise,” Graeme McQueen, communications head at Dublin Chamber.
The last time rates were increased was last year, by 1%.
Why are they being increased?
Commercial rates are going up due to an €8.4 million shortfall in the budget this year, following a change in how revenue from Irish Water properties in the city is being distributed.
According to the council, this is despite a commitment from the Government that Irish Water was supposed to be revenue-neutral to local authorities.
The Government has changed the way it calculates the value of all Irish Water properties nationally. Now it will pay rates to local authorities based on their population, instead of the value of Irish Water properties in their area.
This will result in a rates loss to the city council of €8.4 million, causing a gap in the budget which needs to be filled. The rise in commercial rates is to make up for that gap.
Rates are calculated on the rental value of a business, set by the Valuation Office, which uses a formula to work out how much the business should pay annually.
The “Rateable Valuation” of the property is multiplied by the annual rate on valuation (ARV) – which is increasing from 0.261 0.268.
For example, if the Rateable Valuation on a building is €961,000, based on the current ARV the rates that year will be €250,821. After January, when the increase is implemented, that’ll go up to €257,248.
“In isolation, you may think that this isn’t a big increase, but for a small firm it puts extra pressure on them. These firms are already having to deal with rising insurance prices and water prices are going to go up again from next year on average in Dublin by about 18%,” McQueen said.
How will it affect businesses?
According to McQueen, the Chamber regularly gets feedback from members that they realise the importance of paying the rates – but they want to see value for their money.
“Around three-quarters of our firms would tell us regularly that they don’t really understand where their rates go. They don’t see it, they don’t feel it and they tend to get frustrated when they see dirty streets and overflowing bins, and just a city that doesn’t function as well as it could do,” McQueen said.
“I think now that rates are going up again, they’ll be looking for that value for money.”
Like McQueen, the RAI’s Cummins also said that smaller businesses with tighter margins will be most affected – and chains in particular, as they will be paying rates on multiple properties.
The rate increase will affect all businesses in the city by increasing the charge they pay annually for their premises, though the restaurant sector will likely be particularly hard hit, according to McQueen and Adrian Cummins of the RAI.
The effect will be two-fold when the change kicks in, according to Cummins.
“They’ll either pass it on to the consumer or they’ll absorb the cost themselves. That’s up to each business how they do that. That puts a lot of pressure on our sector,” he said.