The government continues to argue that the two year delay of the 2015 revaluation will see far fewer businesses experience significant increases in liability than might ordinarily have been the case. However, a glance at the Valuation Office Agency’s supporting assumptions make clear that there is insufficient rental evidence to underpin the policy with any degree of credibility.
The tax system isn’t working
Business Secretary, Vince Cable, has suggested that the business rates system is in serious need of overhaul, and that a broader debate on the entire system of business taxation is required.
With one of the lowest Corporation Tax rates in the developed world, ‘Britain is open for business’. However, as Corporation Tax is just one aspect of an opaque business tax regime which has evolved over centuries, the Business Minister’s call for a wide-ranging debate on all aspects of business taxation is well overdue. It should be heeded by the coalition government.
Global retailers benefit at expense of high street
Without doubt, the uneven playing field which exists between traditional high street retailers and their global internet retailing cousins has sparked outrage. Global businesses operating in the UK but appearing to pay little or no tax argue that they are operating within the rules. Regardless of the arguments on either side, the apparent unfairness of the current situation is surely what has caused the Minister to speak out. Yet, global business taxation is just one issue in an over-complicated business tax code which has failed to move with the times.
Provincial locations suffer most from postponement
Business rates liability based upon pre-recession rental valuations means that prime retail centres and London offices stand to benefit from the postponement while provincial high streets, independent businesses, the tourism and leisure sectors and most locations outside of the South-East of England will lose out. In a 21st century echo of Darwin’s ‘survival of the fittest’, the policy will penalise those businesses least able to cope.
In difficult economic conditions, businesses will do whatever is necessary to ensure business survival, by cutting costs to the bone, and using legal means to reduce tax bills wherever possible. It is this latter option, and the approach to tax mitigation taken by an increasing number of businesses, that has provoked the Business Secretary into calling for a wider debate.
This article is part of the spring 2013 edition of Rating in Brief.
Get in touch
Email me direct