MPs call for a business rates reform to help retailers

Tuesday, 04 March 2014
The current system of business rates in the UK is “the main threat to the survival of existing retail businesses in the High Street, and the biggest obstacle to entrepreneurial, new retail businesses starting up,” according to a committee of MPS, the Business, Innovation and Skills Committee (BISC)

Business rates are “single biggest threat to the survival of retail businesses on the high street"

“Both business rates and the high costs of rents are issues that affect the retail sector. The cost of business rates is increasing disproportionately to the cost of rents. The result is causing critical financial difficulties for many retail businesses, especially SMEs," stated a report published by the BISC today. "This means that not only are those businesses suffering, and in danger of closing, but that some High Streets are becoming littered with shops that have closed down. This problem is exacerbated when rents do not reflect the economic realities."

Last week, former Tesco chief executive also called for a business rates system should be reformed and “probably scrapped, as it has not worked for years,” during an interview with BBC Breakfast. He added that the current system “ is an ancient tax based on the value of physical buildings.”

The BISC are calling for the a reform of business rates system and a wholesale review, in order to determine whether retail taxes should be based on sales, rather than the rateable value of a property. The Committee also aims to ascertain if the retail industry needs its own system of business taxation and how often revaluations of the system should take place.

Rates reformed needed to suit the atlered retail environment

Adrian Bailey MP, chair of the Business, Innovation and Skills Committee, commented on the report, arguing: “Since the system was created the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.”

“The Government’s consultation on the administration of business rates at least acknowledges that change is needed. But this is a time for wholesale review and fundamental reform, not for tinkering around the edges,” added Bailey. “The Government’s retail strategies are full of warm words that fail to address the most debilitating levy on existing businesses and the most crucial deterrent to new businesses appearing on the High Street – business rates. Fewer strategies are required, simple, decisive action is needed.”

For now, the BISC are calling for a six month business rates amnesty for business which occupy empty properties. This amnesty would be more than the 50 percent reduction previously announced in the Autumn Statement and would also encourage new businesses to come to the country's High Streets. The committee also suggested that the Government review if business rates are more justly linked to consumer price index (CPI) or retail price index (RPI) and asks for the annual increases to be linked to a two month average of either CPI or RPI, with a cap at two percent.

The BISC report publication comes not long after the British Retail Consortium (BRC) released three potential options to fundamentally change the business rates system, as it feels that the current system is “woefully out of date,” especially since the increase of online shopping. “The debate about Business rates is essentially the debate about the future shape of our cities, our town centers, our high streets and our communities,” previously argued the BRC.

The BRC has shown its support for the BISC, and its director general, Helen Dickinson gave evidence to the inquiry. Dickinson commented: "This report must be the final nail in the coffin of the question: 'do business rates need to be reformed?' They do. Business thinks so. A committee of Parliament thinks so. We very much hope the Government will think so too."

Adam Marshall, director of policy at the British Chambers of Commerce, stressed that business rates affect all forms of businesses and not just the retail sector, adding that reform across all sectors was needed."We need thriving High Streets, but business rates are also the reason many manufacturers and services companies put off investment and hiring decision because their rates bills are just too high," commented Marshall.

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