Business rates inquiry launched

The Treasury Committee has launched an inquiry into business rates, with the Booksellers Association calling for a "root and branch reform" of the business rates system to stop giving digital retailers an “unfair” advantage.

Business rates, which are currently worked out by multiplying the rateable value of property by the standard or small business multiplier, are a long-running bone of contention for the book trade with Amazon coming under fire and trade figures calling for an overhaul of the system. 

In the autumn budget Chancellor Philip Hammond confirmed a tax cut to business rates of one third for all retailers in England with a rateable value of £51,000 or less. The measure will last for the next two years, until the next re-evaluation of rateable values in 2021. Now the Treasury Committee has launched a new inquiry into business rates to scrutinise how government policy has impacted businesses. 

The committee will examine how business rates policy has changed, including business rates retention, alternatives to property-based taxes, such as the proposed digital services tax, and how changes to business rates could impact businesses.  Chair of the Treasury Committee Nicky Morgan MP said: “We’ll examine how the current system is working and consider whether an alternative system, for example a land-value based tax, may help level the playing field between retailers. At the end of the inquiry, we’ll make a series of recommendations to Government on the fairness and effectiveness of the current system, and how it could be improved.” 

Giles Clifton, head of corporate affairs at the Booksellers Association, welcomed the inquiry and said he hopes the BA and booksellers will be asked to give evidence. He said: “The BA has argued that the present business rates system is an analogue design for a digital age, in need of root and branch reform, which is responsible for a disproportionately high level of taxation on bricks and mortar booksellers and which hands a competitive advantage to online retailers who derive real benefit from the system." 

He added the system is "still skewed" despite the measures announced by Hammond in the autumn statement. "These temporary measures do not address the fundamental and systemic iniquities of the system and nor are our members in Scotland, Wales and Northern Ireland benefitting," said Clifton. "The basic ask must be that digital only retailers are not gifted a huge competitive advantage; large booksellers who are the international competition to Amazon, are still competing with one hand tied behind their backs. This is unfair and anti-competitive, and we strongly urge the Select Committee to urge root and branch reform to end this iniquitous situation.”

Waterstones m.d. James Daunt has long said the government needs to rethink business rates. He told The Bookseller: “Waterstones has questioned the iniquity of business rates for many years, and noted the evident need for this to be addressed by our politicians. It is very welcome that they now do so. We are also mindful that there is no easy or obvious answer: taxes must be raised; but they should be done so in ways that have as few perverse impacts as possible.”

The inquiry comes after the BA warned Amazon is "gaming the system" and branded the business rates regime "unfair" after it emerged the online retail giant paid £63m in business rates despite recording £8bn in UK sales. Controversy over Amazon's business rates bill emerged after Lesley Smith, Amazon's director for public policy in the UK & Ireland, was forced to reveal the figure at a House of Lords communications committee meeting last month. 

Independent booksellers expressed frustration that they are proportionately being taxed as much as six times what Amazon pays in business rates relative to its turnover. In the wake of revelations that, despite recording annual turnover of £8bn in the UK, retail giant Amazon pays just £63m in business rates - the proportional equivalent of 0.79% of its takings - a number of indie booksellers revealed their business rates bills are proportionally higher than Amazon. 

The deadline for written submissions is 2nd April, 2019. To send a written submission, visit here.