We are well aware from our clients that the ever increasing burden of business rates is a major issue for many when it comes to growth. Unsurprisingly therefore the call for a comprehensive and fundamental review of the UK’s business rates system was overwhelming at the recent CBI Business Rates Conference (8 May 2019).
Business rates raise over £25 billion per year in the UK. It is the highest property tax of any country. Speaking at the conference, Mel Stride MP, Financial Secretary to the Treasury, described it as a solid and reliable tax for the Government; he maintained that changes to business rates will not buck the tide of a declining high street faced with the onslaught of online shopping. Nonetheless, he did say that the Government wants to help the shops that bind communities together - recognising the social value in a vibrant high street.
Good tax policy?
The Treasury Select Committee launched an inquiry into the effect of business rates in February this year. At the conference, committee member Catherine Mckinnell MP described the inquiry’s remit to include determining whether or not, as a tax, business rates satisfy the “good tax policy test” of fairness, support, growth, certainty, and coherence. It will also ask are there any real alternatives.
The Select Committee has already received over 100 items of written evidence, but the wheels of government, as we know too well currently, tend to turn slowly and it could be some time before actual recommendations for change are under consideration.
But is change needed more urgently? Margins for many high street retailers are falling fast, with some 18% of purchases made on line in 2018 and the growth of e-commerce likely to continue. The Government has brought in some measures – for example assistance for small businesses and changes to the frequency of revaluations - and is looking at the digitalisation of business rates to simplify the system. However according to the majority of the conference audience - representing retailers and business rates advisors - these measures are just putting plasters over the wound.
Wholesale change demanded
Some organisations advocate radical reform, going so far as to propose dispensing with business rates altogether, and/or increasing VAT or other taxes to make up the shortfall; others support replacing it with a land value tax. Most agreed that whilst wholesale change is demanded, business rates cannot be reformed in isolation and any reform must be intrinsically linked to Local Councils’ tax revenues.
It was clear from the conference that there is a consensus that the current level and remit of business rates needs fundamental review; it is not fit for today’s radically more digital economy. Let's hope that the Government soon has the time to, at the very least, listen to the views of its ratepayers.
Photo by Gavin Whitner