We need a hybrid tax model

 

With this column, I know that I have set myself the ultimate Mission Impossible. 

 

For most people, talk about Business Rates could be prescribed on the NHS as an effective medicine for the sleep-deprived. It is a topic smothered in complexities and seemingly as 'sexy' an issue for the majority of people as an academic study of nineteenth century newspaper fonts!

 

But it is indeed about Business Rates that I wish to write.

 

Why?

 

Business Rates are charged on commercial premises based on the rental value of the property, with the level being set annually by Central Government. (Stay awake there at the back).

 

This system of taxing businesses is actually a long-term disincentive for investment and, therefore, a drag on our ongoing wealth creation as a country. 

 

As a businessman for nearly forty years, I know the impact that Business Rates have on my company. Basically, they take money from my business before I have had the chance to do anything. They are an input tax unconnected with any commercial realities I may be facing, yet at a stroke account for the equivalent of over 7% of all the sales of my business, year in, year out.

 

It is also a system riddled with inconsistencies, not least between town centre (usually more expensive) and out-of-town (usually less expensive) businesses and between those that are predominantly online and those who still mainly trade offline.

 

For example, Amazon's overall Business Rates bill for 2020-2021 is estimated to be £71.5m - just 0.37% of its retail sales - far less than that paid by most bricks and mortar retailers who average somewhere between 2% and 3%. 

 

Yet, even online companies find themselves at the mercy of this - and other - perverse business taxation systems.

 

Successive governments have tut-tutted and patted businesses on the head, saying they understood the problems but, hey, what alternative system could accumulate the £25bn annually raised by Business Rates?

Well, this Government seemed intent on at least trying to investigate further and promised in 2019 that a review of Business Rates and possible alternatives would be set up within the lifetime of this Parliament. 

 

Since then, not least due to the COVID19 pandemic, the date for the Review has been put back time and again.

 

It was hoped, with the worst of the pandemic seemingly over thanks to the vaccine rollout programme, that last month's Budget would see the Chancellor finally confirming when the review would start.

 

Instead, aside from some short-term reductions or reliefs, including specific support for firms in retail and hospitality and those investing in green technologies, such as solar panels and heat pumps, no mention was made at all of any review.

 

The implication is clear: Business Rates are here to stay, thanks to yet another Whitehall farce, this time one that clearly has been designed to string us along until it was convenient to bury the idea. 

 

I find this disappointing. In fact, I'd go further and describe it as a betrayal of all the work business organisations, such as the British Chambers of Commerce, have put in to working with The Treasury to date.

 

But I don't think that will be the end of the story. Business Rates are causing such damage to so many otherwise successful ventures that the pressure for an investigation into alternatives - including sales or turnover taxes (in effect, pay as you go)  - will continue to build.

 

Personally, I’d like to see a hybrid business rates system included in any review. This would involve minimum & maximum taxable amounts, consideration of other direct taxes (e.g. NI, VAT, CT), along with a ‘Business Rates Allowance’ – just like our personal tax allowance. The smaller an enterprise, the more benefit would be gained. Surely and inviting prospect for Suffolk whose business base is dominated by smaller firms?

 

That is Mission Possible and one which I'll be involved in until the Government agrees with the wealth creators of this country for a fairer approach to business taxation.

First published on Thursday, November 11, 2021 by www.suffolkfreepress.co.uk & www.dissexpress.co.uk