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Retailers Still Need Fundamental Reform Of Business Rates

13/03/2017 12:45
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For retailers up and down the country, there was little in the Budget to be enthused about. This was a Budget lacking clarity and ambition. While the Chancellor's action to assist those businesses hardest hit from the revaluation is certainly welcome, it will offer little comfort to those paying nearly half of rental values in property tax.

In the grand scheme of things, a £435m relief fund over the next four years is a drop in the ocean in the context of a £25bn tax that's collected every year. Indeed, this temporary relief measure is just another sticking plaster on a chronically ill patient- an unsustainable property tax that's higher here than anywhere in the developed world.

We certainly hope there's more to come; we still need fundamental reform of business rates. But any review in the future needs to look across business taxation as a whole and not be constrained by the technicality of a legal requirement of fiscal neutrality.

The underlying issue sits right across the industry. Property and people intensive businesses, like many retailers, are getting over-taxed relative to their contribution to the economy and this is negatively impacting local investment in jobs and communities up and down the country, particularly those that are more vulnerable. Under the current outdated system, business rates will continue to put a strain on retailers' efforts to drive productivity improvements, with those businesses that are struggling to remain profitable, finding it hard to invest.

The Chancellor also referenced finding a better way to tax the digitised economy across the whole business tax system. While he did not commit to how or indeed what the structure around such considerations might look like, it gives rise to a much wider set of questions than just a retail taxation one. Even within retail this is not about pitching online commerce against shops, but about bringing business taxation in line with the changing nature of business in a modern economy. Certainly an online sales tax is not the answer. That makes no sense when so many retailers are online or want to move online and are trying to integrate the way their online offer works with their shops if they have them. Having any sort of new tax without sorting out problems with the taxes we already have is pointless.

The most important thing now is to see leadership around how Government determines a roadmap towards a business taxation regime that is fit for purpose in the 21st century. Business rates will not cease to be an issue for businesses until we have a fair system of property taxation, which is internationally competitive and will encourage growth and local investment. Only then can the Chancellor's ambition, for the UK to be the best place in the world to start and grow a business, be realised.

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