Commercial property taxes in the UK are the highest in the OECD. Retailers want to see fundamental reform of Scotland’s £2.8 billion annual business rates system in order to support investment, business growth and help revive our high streets – where one out of every 11 premises is vacant.
We are pleased that the Government heeded our calls and commissioned the Rates Review led by Ken Barclay. This must recast business rates for the decades ahead and deliver a system which is modern, sustainable and competitive.
A fully-reformed rates system which flexes with economic and trading conditions and leads to a substantially lower tax burden would increase retailers’ confidence in investing in new and refurbished shop premises and help revive high streets and town centres. At the heart of this agenda should be a medium-term plan to substantially lower the rates burden.
As we wait for the Barclay Review to report in July 2017, there are a number of shorter term measures which Scottish Ministers should pursue. Top of the list is restoring poundage rate parity with England for medium-sized and larger firms by scrapping the £62.4 million annual rates surcharge, which affects one in every eight firms. It is far from clear why firms operating in Scotland should pay more in rates than firms in comparable premises elsewhere in the UK, particularly when many have options over investment elsewhere in the UK or indeed abroad.
In addition, the planned 2017 rise in the headline poundage rate for all other firms should also be shelved. Stimulating business investment is more difficult when costs are rising as it means diverting cash and resources away from growing the business.