re-basing the multiplier to something manageable, that businesses can afford, will mean that the whole question of the myriad of reliefs can become simplified and resolved also.He calls for an urgent drastic reduction in the multiplier and simplification of the reliefs system. Business Rates has been in existence for over 400 years it survived the Industrial Revolution- it should be able to deal with the change in how people buy their groceries, Webber adds. Colliers? arguments are as follows:
- The Multiplier ( the figure the?rateable value?(RV)of each property is multiplied by to create the rates bill) is just too high. At a current level of just over 0.51, it is in effect a 51% tax on the rental value of commercial premises, and for many is clearly unaffordable. As we have seen with income tax, once the tax rate reaches or exceeds 50% the amount collected reduces significantly. In business rates this plays out with a significant increase in schemes to make the most use of reliefs to mitigate the liability.
- The Government should re base the multiplier at every revaluation to avoid the? creep in the period of revaluation . This also includes an amount for ‘slippage? or reduction in the total rateable value estimated by the VOA . This amount is always over -estimated which contributes to an over estimation of the multiplier.
- The multiplier should be reduced to the level it was in 1990 when the net amount collected in business rates represented 31% of the total Rateable Value in the Rating List. The reason it is so high is not only the creep? but also an annual RPI increase which has inflated the multiplier for most of the last 30 years. Reducing business rates to an effectively 30% tax is much more manageable for businesses to cope with.
- We do understand that inflationary increases take place each year to pay for public services? but as we believe the revaluation cycle should be no longer than 3 years and ideally annually- then the question about annual inflationary changes to the multiplier becomes academic .
- We need to Introduce some political accountability for the annual increases in the multiplier.
There is no ownership and correlation with ever increasing bills.A clear 3-year business plan should be set out by local authorities and explained to the electorate so people could see where the money raised by business rates is being spent.
- Reducing the multiplier will also reduce the need for so many reliefs. Granting reliefs is often a politically expediate way of buying popularity and votes. Such reliefs have been introduced to counter the rise of the multiplier and high business rates bills. Ironically the introduction of reliefs has just led to the increase in the multiplier to subsidise them.
Webber says we might also consider a system in which landlords pay something in business rates even when the premises are occupied.Many European systems levy an annual charge on landlords and even a 5p or 10p in the 1 levy would directly involve landlords in paying for local services while reducing the incentive for higher and higher rents which inflate the Rateable Value.
Business Rates Reliefs
- Small Business Rates Relief: Reliefs amount to 7.44bn or 23% of the approximate 32bn tax revenue. SBRR is the smallest element of reliefs and until current multiplier levels are tackled, Colliers believes it is vital to support the economy and local people/ businesses in the community.
- ?Empty Property Rates Relief should be extended and not curtailed in the current climate.
- Instead of only the warehouse and industrial sector receiving a 6 months empty rates holiday that this should be extended to the retail and office sector.
- Review Reliefs every Revaluation cycle reliefs are necessary, but they have been handed out by politicians of all political persuasions over the last 30 years to satisfy short term political and not economic aims. They often become permanent and then baked into a business plan. Colliers believe they should be reviewed at every revaluation cycle at least every 3 years ‘so the drug of subsidy does not become an addiction.
- Reduce Relief Hand Outs Once the multiplier has been rebased at the correct? 30% level , the need to hand out so much money in reliefs which will be significantly reduced- giving? the opportunity for local authorities and business to look at targeted levy for specific infrastructure projects that landlords and tenants could contribute to.
- Central Government still needs set the majority of reliefs to ensure an equal playing field with additional discretion (at local cost) available for those local councils wishing to encourage/support specific areas. Too much local discretion leads to a postcode lottery and could see retailers and employers concentrating on certain areas leaving others with vast amounts of empty properties, limited retailers/employers and perhaps a prevalence of charity shops.
- Abuses The greater the rates burden and the greater the number of reliefs the greater incentive to abuse the system. The 52% tax we have today is the equivalent of income tax reaching that level and collection rates plummeting.
“In the second part of the consultation we will be able to be industry specific and look at ways in which any reduction in the business rates tax take is to be replaced, whether by an online tax system or by other means.”Business rates form a vital part of local authority funding. However, the system has got old off-kilter with the needs and current business and economic climate, Webber explains. A 50 % plus tax, likely to rise further is just unsustainable and will lead only to further business closures and job losses, particularly when the Covid-19 business rates holiday for the retail and hospitality sector come to an end next April.
we welcome the call for reform but call on the government to come to its conclusions and offer solutions quickly. In this period of pandemic, businesses are making their decisions now about whether they stay open or close.”Increasing costs, of which business rates play a big part will be a significant factor in the decision making. Webber calls for a drastic cut in the multiplier and subsequent business rate bills and we urge that this is done sooner than later. “Next year or even by the November Budget could just be too late and the government may find the golden goose of business rates really has been well and truly cooked.”
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