The Treasury Committee has published a unanimously-agreed report on the impact of Business Rates, demanding that the government must examine alternatives to the existing system.

It pointed out that since Business Rates were introduced in their current form in 1990, the revenue they have generated has outpaced inflation, with MPs hearing consistently that rates do not fall upon all business equally, often placing a far greater cost on physical businesses, as opposed to those that rely more upon an online presence.

“Tweaking the current system of Business Rates through an increasingly complex web of reliefs does little to address the negative aspects of this tax and simply demonstrates how broken the system is,” read a statement. “The government should take a deeper look at possible alternatives and prepare a consultation in time for Spring Statement 2020.”

In the meantime, the committee suggested improving reliefs, reducing statutory limits for responding to appeals, and ensuring that the Valuation Office Agency (VOA) is properly resourced.

During its hearings, the committee was presented with numerous alternatives to the current system, including a land value tax, online sales levy, profits tax, single consolidated tax and hybrid tax.

It stated that further work is needed before any recommendations are made for alternatives, but noted that it should not be left up to business to develop and evaluate detailed proposals.

“The government must be curious, proactive and creative in exploring alternative options to such an important source of government revenue,” it stated, accepting that the current system generated £31 billion of income in 2018/19.

“The current system acts as a disincentive to investment, as investment can lead to an immediate Business Rates revaluation based on a presumption of increased turnover – this contradicts wider government aims to boost productivity and encourage investment in energy efficient technology to lower the UK’s carbon emissions.”

Alison McGovern, the Treasury Committee’s lead member for this inquiry, said: “It’s abundantly clear that the current Business Rates system is broken – the tax represents an increasing burden on businesses, particularly those with a physical high street presence struggling to remain competitive.”

Long a campaigner for rates reform, the British Retail Consortium’s chief executive Helen Dickinson welcomed the report, agreeing that fixing transitional relief, introducing an improvement relief to unlock investment, and better resourcing the VOA, were all the focus of a letter to the chancellor signed by over 50 retailers in August.

“Business rates are a significant driver of store closures and job losses and retailers have been getting a raw deal for too long,” she stated, adding: “The General Election offers a unique opportunity to address some of the imbalances that have contributed to tens of thousands of job losses for the industry – we urge political parties to support local shops, local shopworkers and local communities by including these recommendations in their manifestos.”

Share Story: