East Anglia: Retailers call for reform of ‘archaic’ rates system
09:01 19 February 2014
High street retailers condemned the UK’s business rates system as “archaic and outdated” as they called for it to be brought into the modern era.
Suffolk retailers joined the British Retail Consortium (BRC) is calling for major reform of the “outdated and cumbersome” property tax and create something which supports job creation and helps revive struggling high streets.
The BRC, which has produced a report along with Ernst & Young accountants ahead of a Government discussion paper, says the system could be re-designed to encourage energy efficiency by basing payments on energy usage.
Mark Cordell, chief executive of the Bury St Edmunds Business Improvement District said he was delighted that the BRC was proposing to restructure the “archaic and outdated” system, which he claimed was out of balance.
“The current system disproportionately impacts upon town centre businesses,” he said.
“The whole business rates system is based upon the premise that the most profitable place to trade is on the High Street.
“This may have been the case decades ago but time has moved on and with the onset of internet trading and out of town retail developments this is no longer the case.
“It is estimated that the government will get an income of over £16billion this year from business rates and the country can’t afford to lose this level of income but how this income is gained and how it is balanced across the board between small independent businesses and international conglomerates needs to be better balanced and hopefully these proposals will contribute to the necessary changed required to way business rates are collected.”
Luke Morris, chairman of Suffolk Institute of Directors, said the BRC report sparked an “interesting debate”.
His organisation had already called for business rates to be frozen until the 2017 re-rating.
“In a time where businesses have had to become leaner and are forced to relentlessly consider value for money, this report will also quite rightly cause those same businesses to ask some pretty fundamental questions,” he said.
“Just what are rates for, are they fit for purpose and are businesses getting that same value for money they provide from the state?”
The BRC has said it hopes its proposals would stimulate debate on reform that “goes beyond tinkering with the existing system”.
Business groups have long argued that the current framework of rates discourages investment and is desperately in need of modernisation.
The BRC proposals include shifting the basis for taxing property by replacing the current system with a tax based on other measures, such as energy usage, and rewarding job creation by offering a discount on the rates bill.
They also suggest easing the burden on successful businesses by offering a discount to businesses based on the corporation tax they are paying.
Finally, they call for a new, simplified, banded revaluation system for assessing rates, with revaluations on a more regular basis.
Rates are currently based on rental valuations set in 2008, when the cost of renting a shop or an office in many parts of the UK was far higher than today.
Helen Dickinson, BRC director general, said: “We have a once in a generation chance to fundamentally change the business rates system and the time is right to think creatively and in the best long term economic interests of the UK.
“These potential options would be good for the public, the economy and businesses small and large, while still providing significant tax revenues for the Government.”
Sainsbury’s finance director John Rogers, who chaired a group of executives leading the project, said: “The current system is outdated and cumbersome and does nothing to encourage retailers to invest.
“We believe we can do better for business and for tax payers and these options represent tangible progress in the debate.”
In December, high streets were given some relief when Chancellor George Osborne announced plans to offer small retailers a £1,000 discount on their business rates - as well as capping future rate increases at 2%.
The Chancellor also announced plans for new reoccupation relief to encourage use of vacant town centre shops, halving rates for new occupants.
The BRC hopes its proposals will create more jobs to add to the three million already employed in the retail industry.
A Treasury spokeswoman said: “At Autumn Statement 2013, the Government announced over £1 billion of business rates support which will benefit all 1.8m ratepayers.
“We are also taking action to improve the transparency, efficiency and responsiveness of business rates with a review of business rates administration.
“The terms of reference for the review were published last week and we look forward to engaging further with businesses and stakeholders once the discussion paper is published later in the spring.
“We welcome the BRC’s contribution to the discussion and will consider their options on administrative reform as part of our review.”