THE BUSINESS RATES SYSTEM IS NO LONGER FIT FOR PURPOSE AND REQUIRES FUNDAMENTAL REFORM
A tax system skewed towards people and property is contributing to store closures and job losses, and stalling the successful reinvention of our high streets.
Retail is transforming. Historically, there has been a clear link between the success of a retailer and its physical shop where all transactions took place. However, due to changing technology and consumer behaviour, retail and the wider economy operate very differently now. It is critical that the business taxation system is updated for the 21st Century. A key component of the business tax system that needs addressing is business rates.
Retailers alone are responsible for £7 billion in business rates annually or a quarter of the overall total. The central problem with the rates system is that the national multiplier has grown out of proportion since its introduction in 1990, irrespective of the strength of the economy or success of businesses. An over-dependence on input taxes harms retailers, which are people and property intensive businesses, and such taxes have grown disproportionately compared to other taxes such as corporation tax. For every £1 retailers pay in the latter, they pay £2.30 in business rates.
The Government should revisit its current approach to business taxation and look across all taxes. Given the fundamental questions we now face in a digital and globalised world we need to go further than the current business tax road map, published by Government in March 2016. Specifically, the Government needs to reduce the business rates burden by rebalancing input and output taxes, address other underlying issues with the system and encourage investment, which would lead to fewer shop closures, greater productivity and improved living standards.
Our goal is securing fundamental reform of business taxation.
We continue to seek further incremental improvements to the business rates system.