NAIVE TAX CALL COULD COST RETAILERS £500m

Tuesday 7 August 2007

Retailers have described proposals to give local authorities the power to tax businesses to fund local projects as spectacularly naïve.

The Communities and Local Government Committee’s report on ‘Supplementary Business Rates’ is published today (Tuesday). It recommends that local authorities be given the power to levy an additional tax, over-and-above what is collected on their behalf through business rates.

The British Retail Consortium (BRC), which opposes supplementary business rates, is seriously concerned, not only by the committee’s support for increased property taxes, but by the vagueness of the restrictions which would be placed on local authorities. Retailers would be effectively powerless to oppose the imposition of any extra levy of up to ten percent of their regular business rates. If applied across all retail businesses this would mean that local authorities could cream nearly half-a-billion pounds off retailers over and above the £4.5bn they receive in business rates each year. 

The BRC believes such a tax would be open to widespread abuse and that local authorities would not be able to resist the temptation to tax businesses to pay for projects which should be provided through existing budgets. Businesses would also have no real control over which projects their extra taxes would fund because they do not have a vote. This would be a classic case of taxation without representation.

BRC Director General Kevin Hawkins said: “The Communities and Local Government Committee is being spectacularly naïve if it honestly believes local authorities won’t use a supplementary business rate to raise extra revenue. Giving local authorities the power to directly tax businesses is like setting Pooh Bear loose on the honey reserves, only this time it is retailers that will get stung.   

“Other than in the most exceptional circumstances it is unacceptable to expect retailers to fund project that councils should be paying for from existing revenue, particularly as retailers already contribute £4.5bn a year to local authorities through business rates alone.

“We do not support taxation without representation and supplementary business rates would give councilors the freedom to tax businesses without having to face them at the ballot box. That is not on.”

The BRC is also concerned that the introduction of Supplementary Business Rates would damage competition and create an uneven playing field between retailers. In some instances shops on opposite sides of the street could be paying different rates of tax. That would distort property values and inhibit investment in the areas where supplementary taxes were being levied.