Government rejects calls for radical business rates reform

The Government has rejected all suggested changes to the retail business rates system made in the High Streets and Town Centres in 2030 inquiry.

Parliament’s Housing, Communities and Local Government Committee (HCLG) had called for radical changes to reduce or replace the current business rates regime, including a new sales tax, increased VAT, additional taxes for online retailers and cuts in rates for town centre retailers and retailers that have made in-store investments.

However, the official government response released this week stated: “Property taxes have clear advantages and are an important part of the tax system,” and refused to conduct a separate detailed assessment of the suggested reforms. It said the alternatives presented by the inquiry would be “extremely challenging” to introduce, be legally questionable, would have “significant impacts on consumers” and may increase the taxes paid by some businesses in order to subsidise further reductions for others. 

Attacking the Government’s response, HCLG committee chair MP Clive Betts claimed: “They are unwilling to make the radical change required that reflects the realities of modern commerce and gives shops on the high street a fighting chance.” Betts said

ACS chief executive James Lowman agreed, commenting:  “This response doesn’t get to the heart of the problem with the business rates system: it penalises businesses for investing. There needs to be a cross-government effort to make this system work before it damages high streets and the economy even further.”

NFRN national president Mike Mitchelson added: ““Independent retailers are buckling under crippling overheads and business rates are the largest burden that they have to bear.  The system is archaic and an overhaul is long overdue to stop town centres dying.  A fairer business rates system will encourage retailers to expand and invest in their businesses.”

Defending the current tax regime, the Government highlighted the two year 33% rates cut for retail properties with a rateable value of below £51,000 that began in April as “providing upfront support for small and independent retailers, including shops, cafes and pubs.”

The Government also refused to create a new arbitrator for disputes between retailers and landlords, or to ban retail unit letting agreements with upwards only rent increase clauses.

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