The Treasury Committee has launched a new inquiry into business rates to scrutinise how government policy has impacted high street businesses.
The committee will examine how business rates policy has changed, including business rates retention, alternatives to property-based taxes, such as the proposed digital services tax.
Nicky Morgan MP, chair of the Treasury Committee, said: “Many high street businesses are struggling to remain competitive. It has been estimated that 10,000 shops will close this year. Unless action is taken, closures could continue and job losses may soar. Business rates can represent a substantial financial burden on the high street. The Treasury Committee is therefore launching an inquiry today (1 February) into the effectiveness and impact of these rates on business.
“We’ll examine how the current system is working and consider whether an alternative system, for example a land-value based tax, may help level the playing field between retailers. At the end of the inquiry, we’ll make a series of recommendations to government on the fairness and effectiveness of the current system, and how it could be improved.”
Real estate agents Altus Group “warmly welcomed” the inquiry saying the budget measures announced last year was great for smaller, independent retailers but “did nothing to help major retail and hospitality businesses”.
Robert Hayton, head of UK business rates, said: “The long term unfairnesses for those large premises where property values have fallen sharply but are then denied the commensurate tax reduction must be addressed by this inquiry and, hopefully, this inquiry can take the bull by the horns and see how to best level the tax to turnover ratio with large online only retailers but a land value tax isn’t the answer and is likely to make the system less not more fair.”
John Webber, head of business rates at Colliers, added that while the review was welcomed, it felt like “loud banging on the stable door long after the horse has galloped off down the street.” He also said the regime needed a “roots and branches reform” and although it was an “admission” by the government, he was concerned that the review wouldn’t change things in time. Webber went on to say a new rate bill demanding more money could be “the end of the road” for many businesses.
He added: “But whatever review takes place, if the government insists on raising the same amount of money by the same group of people (Over £7bn of the £27bn of business rates taken are paid by the retail sector), then we will be no further forward.”
UKHospitality also greeted the launch of a new inquiry into the impact of business rates. Chief executive Kate Nicholls said: “A thorough examination of the effects of business rates has been a long time coming. The system is now completely out of date, doesn’t reflect the realities of business in the 21st Century and disproportionately cripples hospitality.
“This is a positive sign that business rates is still very much on Parliament’s agenda, despite the Brexit distraction, and rightly so. Only a complete overhaul of the system – as promised in the Conservative Manifesto – will ensure high street businesses, and hospitality employers in particular, are finally going to be taxed fairly.”