CBI President must call for an independent review of an “uneconomical, unsustainable and unintelligible” business rate regime that is worsening the Main Street crisis.
Group of companies chairman John Allan to tell business leaders on Wednesday the ‘broken system’ has contributed to the failure of ailing retailers such as Debenhams, long gaps between reassessments adding to the pain felt by businesses in many UK shopping streets.
“The corporate pricing system has become – over time – unprofitable, unsustainable and frankly unintelligible,” Allan, who is also president of Tesco, told a CBI conference. “Debenhams, once a stronghold on Britain’s Main Street, has come under administration. But I have yet to read an explanation that doesn’t cite trade rates as at least part of the cause. “
Members of the Treasury Select Committee are studying the impact of commercial rates – the commercial equivalent of the housing tax – and are considering alternatives to the property tax.
Tuesday. Kate Nicholls, managing director of UK Hospitality, told the committee the government needs a royal commission to look into the case of commercial tariffs, which raise around £ 30 billion a year. “You have a system which is fundamentally not suited to the modern economy,” she said. ” It’s old fashioned. We need something like a royal commission or an independent inquiry, because there will be winners or losers no matter what model you adopt. “
Nicholls said property tax was one of the biggest overhead costs for hotel companies, which paid 11% of all corporate rates when they only accounted for 2.5% of business activity. “Rates can be the tipping point between running a profitable business and running a marginal business,” she said. “We lost 4,000 outlets last year on a net basis. This represents 10,000 jobs lost in the entire hospitality sector. Something that has been put in place that is basically unchanged since 1988 is not working for the modern economy.
MPs were inundated with submissions from leading retailers and business groups suggesting alternatives to the tax. Tesco – which pays around £ 700million a year in business rates, making it one of the biggest payers of property tax – has suggested the government impose a 2% online sales tax to help pay for reduced business rates for stores.
In a statement released Tuesday, Sebastian James, chief executive of Boots, added his voice to calls for reform, warning that the “increasingly fragile ecosystem” of main streets and city centers was shaken by change unprecedented and far-reaching.
“The rate regime is accelerating the visible decline of shopping streets in many parts of the UK, with the ripple effect of increased job losses, lower National Insurance revenues and reduced investment in learning and skills. Stores are closing and the resulting impact on local communities goes beyond reduced access to products and services, ”said James.
Rather than a tax on online sales, James suggests that the government consider imposing a “trade tax” on retailers based on their retail turnover. An existing tax collection mechanism such as VAT could be used to collect it with a 1% to 2% levy amounting to between £ 4 billion and £ 8 billion. This would apply to all retailers, regardless of industry or business model, he suggests.
On Wednesday, Allan will cite the thousands of businesses that appeal their business rate bill each year as evidence of a growing “lack of confidence” in the system. The government had “fine-tuned” the regime, but there was now a need for a “full and independent review of the corporate pricing system”. He’ll say, “The more sticky bandages we add, the bigger the signal that the system is down and in need of a fundamental overhaul. “