Business rates are back in the news again. Justin King, Chief Executive of Sainsbury’s, has added his voice to the chorus calling for changes in the way retailers are taxed.
Instead of the current system of high taxes for property occupied by retailers – most notably in the form of high business rates bills – and low (or no) tax for internet based retailers, Mr King told the Daily Telegraph this week that he wants to see a more level playing field. A system similar to the Market Fairness Act 2013 in the United States, which allows US states to collect taxes on the sale of online products or services, would work well in the UK according to Mr King and should be investigated further.
Retail Week readers will know that the Government has so far taken very little interest in reducing retailers’ business rates bills, much to the disdain of the industry. As a result Mr King is sensibly aiming his lobbying at the 2015 election manifestos – navigating around any blocks from Treasury – though not completely bypassing the Government’s focus on raising tax from fixed assets, such as property, over those that are more variable,such as profits.
In the real world of here and now however, more immediate solutions need to be found on how to lower retailers’ business rates bills and help more firms to survive.
In my last Retail Week article I called for improvements in the efficiency of the business rates appeals system as a way of assisting struggling retailers. A fast and responsive rates appeals system, after all, would enable any refunds on incorrect rates bills to be processed and distributed as soon as possible.
Since then I am pleased to see that the backlog of appeals outstanding with the Valuation Office Agency (VOA) has reduced from 200,000 in Q3 2012-13 to a little over 180,000 in Q4 2012-13. Though that still leaves a significant number of outstanding appeals, this is a positive step forward that should be welcomed.
However, like many experts, CVS believes that more needs to be done to make the business rates system even more responsive for rate payers. The Government regularly looks to the past for solutions on how to solve current problems – just look at the resurgence of Enterprise Zones over the past couple of years.
Reintroducing provisions in the now outdated 1967 General Rate Act would, we believe, help rate payers pay the right amount in business rates and would free up more valuable valuation officer-time.
Without delving into too much detail here, the 1967 Act allowed the lower of two valuations to become the rateable value of a property – either the current open market rental value of the property at the date of the appeal or the rental value of the property at the Valuation Date. Reintroducing the two valuation approach now would create a fairer system, especially for those retailers who have been hit by a decline in the vitality of their areas.
There has been much debate over the past months on the need for business rates bills to better reflect current rents, especially given the fall in rental values in many retail locations. Seismic changes in policy as put forward by Mr King take time. Looking to the past to help resolve a very real issue facing thousands of retailer rate payers is more urgent and therefore deserves greater attention.
Don Baker, is the chairman of Rating at business rates experts CVS