BA welcomes Select Committee verdict on business rates

The Booksellers Association has welcomed the Treasury Select Committee findings into business rates which describe the current regime as a "broken system".

The report issued by the cross-party group of MPs has said the current system has seen growth in business rates outgrowing inflation so it now means an “increasingly significant proportion of the total taxes borne by business”. It has urged the government to revise the system. Similarly the BA's m.d. Meryl Halls has said business rates need to be "completely overhauled and placed within a corporate tax system that is fair to all".

Halls told The Bookseller: “The BA welcomes these recommendations as getting to the heart of all that is wrong with the current system. As a property tax with insufficient regard for the businesses that operate within those properties, business rates are not conceptually fit for purpose. In the implementation of this flawed tax, it cannot be right that business rates continue to rise at above-inflation rates, while other corporate tax rates fall by comparison; a situation that places high street businesses in the situation of institutional disadvantage that is crippling high streets and undermining communities. The reliefs that are erratically applied to this broken system don’t even paper over the cracks."

The newly published 64-page report titled ‘Impact of business rates on business’ reads: “The government should explain whether it is government policy to allow the growth in business rates to outpace inflation. The increase in the tax rate of business rates appears to be inconsistent when compared to the UK’s other corporate tax rates which are falling.” The Committee urges the government to consider “the impact that the level of business rates has on the attractiveness of the UK as a destination for investment”.

Members criticised the “complexity” of the current system which sees all 361 billing authorities running “their business rates system as they see fit”.

“The number of reliefs that are needed for business rates to work indicate a broken system” the report reads. “Each additional relief adds a further layer of bureaucracy to an already complex system. HM Treasury should review all business rate reliefs to ensure that they remain necessary. We discuss later the extent to which business rates align with government policy to encourage investment. We note that the system of reliefs have a part to play in this.”

The appeal system also came under fire and the Committee called on the government to resolve the “unacceptable” backlog of appeals lodged over rates dating back over nine years. The method of valuation of properties by the VOA must also be improved, the Committee said. 

The government should consider alternatives to the current system of business rates, the MPs said, instead considering examples from other countries with Land Value Taxes such as Australia and Denmark.

Ultimately, members believes action is needed and that there should be consultation in time for the next Spring Statement. “It is clear change is needed to the current business rates system. Given the changing nature of the economy, and with high streets on the decline, the Government needs to be curious, proactive and creative in exploring alternative options to such an important source of Government revenue."

The Committee added: "We recommend that the Government prepares a consultation in time for the next Spring Statement to identify potential alternatives to the current system of business rates and form the basis for a subsequent detailed evaluation of viable options.”

Launched in February, the investigation followed months of detailed consultation with industry bodies - Halls told committee members in May that the current arrangement was "unfit for purpose", citing examples such as BrOOK'S in Piner - which was ordered to pay an extra £11k in business rates following an updated valuation earlier this year - and stressed the current rates system does not help regeneration on the High Street. 

Halls said that many of her points were reflected in the final report. "In our written submissions and in our oral testimony in front of the Select Committee, we made many of the points picked up by the committee in their report – including the counterproductive fact that improvements to business premises leads to increased business rate charges, thereby disincentivising investment, and the fact that the system is so broken that the reliefs from it become the rule rather than the exception. We look forward very much to the government taking heed of the Committee’s call to carry out a detailed evaluation of viable options."

She added: "We would also like to thank those BA members who took time to put in their own submissions; taken with the BA submission, this ensured the bookselling voice was heard as part of this process, and that bookshop examples, such as the egregious case of BrOOK'S in Pinner, were highlighted as examples of the real-life impact of the outdated and now openly unfair and destructive system.”

In January the BA described Amazon as "gaming the system" and branded the business rates regime "unfair" -  the e-retail giant paid only £63m in business rates despite recording £8bn in UK sales, it emerged in January.  Independent booksellers revealed frustration that they are proportionately being taxed as much as six times what Amazon pays in business rates relative to its turnover. Subsequently a number of indie booksellers revealed their business rates bills are proportionally higher than Amazon.