Retailers divided over business rates in submissions to Treasury review

The Treasury published its interim report into its business rates review on Tuesday afternoon, including summaries of responses to its call for evidence from 487 respondents. 

The report said there was a “wide spectrum” of responses to questions about whether an online sales tax would be beneficial to the future of the high street, with some stakeholders arguing it would “level the playing field” while others said it “would not save the high street and should not be introduced if this is the sole aim”.

Respondents also said there was a chance that any online sales tax would be passed on by retailers to shoppers, “increasing prices and affecting people’s disposable income and quality of life”.

Those in favour of an online sales tax said that, alongside online retail sales, which account for £100bn annually, other sectors such as travel, accommodation and software should be in the tax’s new scope. 

They argue that these sectors used to generate the majority of their sales through bricks-and-mortar shops but have now moved online. This would expand the tax base to £700bn. 

Respondents to the call for evidence were more unanimous on changes to business rates in general, calling on the Treasury to fix the business rates multipliers and revalue them more frequently. 

The majority of respondents called for a revaluation every three years, rather than the current five, a call that was broadly supported by local authority respondents. 

Respondents were also broadly supportive of annual returns to be published by the Valuation Office Agency. 

The Treasury said: “Previous reviews have reflected a consensus that business rates have distinct strengths as a tax.

“These factors, such as the efficiency of collection, the high level of revenue raised and the relative difficulty of evasion, make it an essential source of funding for local services.

“The results of this call for evidence bear out that view, but respondents have also emphasised a range of important challenges.

“These include the burden of the tax, including its administration burdens, the targeting and effectiveness of the reliefs system, the frequency of revaluations and calls to address competition from online sales.”

British Retail Consortium property policy advisor Dominic Curran said: “It has long been clear that the business rates system is broken, holding back investment, adding to the pressure of shop closures, and ultimately costing jobs in retail. Most respondents agreed that the tax burden is too high, that the system is overly complex, and that the Valuation Office needs better resourcing to ensure appeals are dealt with effectively. The BRC has been pressing for action on all of these and the broad support for this should encourage the chancellor to undertake vital reforms.

“The interim report outlines the views of business, now we need government to act as soon as possible, so we can fix this broken tax once and for all.”

Altus Group UK property tax president Robert Hayton said the government appeared to be moving away from its manifesto pledge to cut business rates in favour of merely improving them. 

He said: “With government borrowing at almost £280bn during the current financial year and public sector debt at £2.13trn, it remains to be seen whether the government will now be able to deliver upon their election manifesto pledge to cut the overall burden of business rates in the long term.

“There now seems to be a distinct shift away from that pledge in favour of a commitment to simply improving the tax system.”

Chancellor Rishi Sunak has delayed the publication of the final report on what the government plans to do on business rates reform until the autumn.

Sunak is also expected to make a final decision on an online sales tax later in the year and is reportedly looking to take his lead from US president Joe Biden’s administration.