BlogLatest NewsRetailers call for business rate shake-up

Retailers call for business rate shake-up

Retailers are calling for a radical overhaul of the business rate regime that could see the tax based on energy use rather than property values.

The British Retail Consortium presented three alternatives to a system the industry claims has been rendered out of date by the rise of online shopping.

"Our fundamental premise is that something significant needs to change that will remove the disincentive we have at the moment to operate from property," said Helen Dickinson, director general of the BRC. She said retailers wanted to keep open the option of fundamental reform, despite the government's current approach of tinkering with the existing set-up.

Retailers want change as struggling stores have seen their business rates rise even as the economic downturn has hit sales. Shops are also being hit by shoppers switching to online purchases where specialists such as Amazon are benefiting from lower business rates because they don't operate stores in shopping centres or high streets.

One option put forward by the BRC would hand those businesses who pay UK corporation tax a discount on their rates bill. While Dickinson said this suggestion was not intended to target online stores, it could have an impact on multinational online retailers such as Amazon that have been criticised for paying little corporation tax in the UK.

A second option would link a discount on the rates bill to the number of staff employed by a business. As major employers, large retailers would be the main beneficiaries of such a reform.

But the BRC's most radical option is to create a new tax to replace business rates based on energy use, which it says could be linked to the climate change levy. That could exclude small businesses, which do not pay the CCL, from the rates system entirely.

Dickinson said such a tax would "generate positive behaviour in a direction that is beneficial to the UK, local communities and global society as a whole." She suggested that the system could be designed so that a similar amount of total taxes would be raised as under the rates system but that tax would be distributed differently.

However, industry groups raised concerns that energy-intensive industries such as manufacturing would suffer disproportionately as a result of the change.

Nicola Walker, business environment director for the CBI, said: "It is essential that any reform of the current system doesn't add complexity to the UK's tax regime or unduly burden key sectors of the economy, like manufacturers."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, added: "We see no logic in linking taxes which fund local services with business energy consumption. Manufacturers already face a higher burden in terms of their energy costs as a result of a raft of green levies."

Some high street campaigners criticised the BRC for failing to support small retailers by ignoring the simple idea of bringing forward the date of the next revaluation of rates from its delayed 2017 deadline.

Independent retailer Paul Turner-Mitchell, who undertook a study of business rates for the Grimsey high street review published last year, said: "This is a report by the big boys for the big boys to save the big boys money." "Our research revealed that the big four supermarkets have saved £1.3bn as a result of the latest revaluation being postponed. As a result, small businesses are effectively subsidising the likes of Tesco, Asda, Sainsbury's and Morrisons," Turner-Mitchell said

The BRC's initial proposals will be fleshed out with help from accountancy firm EY and consultation with other business groups by May. The BRC is then hoping to work with policy advisers to all the major political parties to feed into their manifestos ahead of the May 2015 general election.

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