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Business Rates: Green Alternatives To Help Small Businesses Thrive

08/03/2017 12:20
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Businesses are complaining about taxes again, but why should you care? This is just the background music to the annual budget ritual, isn't it? And don't the bosses have plenty of lobbyists to speak up for them?

Well no, in fact the upgrading of business rates and the fierce debate it has sparked raises important questions about political mismanagement and corporate power.

The bone of contention is the contribution local businesses make to the local services they use - a bit like the council tax we all pay. This is based on the rateable value of the property the business occupies, rather than any indication of its earning potential.

The relative value of different properties, and hence the value on which the tax is charged, change all the time. Improved transport connections or gentrification raises the rentable value of property while economic decline reduces this. Every five years a revaluation takes place, usually timed for the beginning of an electoral cycle, thereby saving political embarrassment. Except this one was due in 2015 and the Tories shelved it for fear of damaging their electoral prospects.

So this revaluation is two years late and is having more impact than usual - and causing more of an outcry. Because of the grossly unbalanced nature of our economy, this revaluation will see rates in London and the South East rise while those in rural and less thriving urban areas fall.

But there is a bigger picture here. As well as avoiding the revaluation the Tories have embarked on a policy of imposing ever increasing cuts on local government. This is in spite of the fact that local authorities provide the most expensive services we all rely on for a civilised society: health care, social care, and education as well as waste collection and much of our road network. Local government also regularly scores best in tests of public efficiency.

In return for these cuts the government has 'allowed' local councils to hold on to 50% of business rates, which were previously levied locally but invested nationally. The Tories' decision to make local authorities responsible for finding their own income puts pressure on them to agree to business development, no matter how destructive, since this is one of few areas where they can actually increase their income.

None of this is likely to help the local businesses that give life and variety to our local communities. In spite of any number of shopping tsars, independent businesses continue to struggle and many fail to survive. So what could Greens do to help them?

We are strongly committed to revitalising local economies and have several key proposals.

We should shift to annual revaluation to smooth out the changes in rates and take the discussion out of the political cycle.

Paul Johnson of the Institute of Fiscal Studies (IFS) supports what has long been a central plank of Green thinking, backing a move towards a Land Value Tax for property -- something that would shift the burden of local tax to the owner of property rather than the tenant.

We should increase the power of local government over a wider range of taxes, combined with a national framework for redistribution. Only this can prevent the suffering of local services under the cosh of central government austerity.

Finally, we need a local tax system fit for the digital age. Giant online corporations are contributing to putting small local businesses out of business. Yet they contribute nothing to supporting the infrastructure in our communities. Only by getting serious about ending profit shifting, and by reinstating the differential in corporation tax between large and small businesses, can we create fair competition between chains and independents.

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