Government urged to reform ‘growth killer’ business rates
Britain’s largest industry body has called on the government to urgently reform business rates, which it says is a “growth killer”.
The Confederation of British Industry (CBI) has said the government should keep its manifesto pledge to reform the business rates system as a matter of urgency.
Business rates is a tax determined by the value of a firm’s property, but recent revaluations of companies’ rateable values have sent bills soaring for many.
The tax has played a major role in cancelled, reduced or delayed investment in the properties of 32 per cent of the 700 business surveyed by the CBI.
The UK has the highest property tax levels in the OECD, according to the industry body, with property tax as a share of GDP more than four times higher than that of Germany.
Firms say they would reinvest tax savings
As many as 76 per cent of the CBI’s respondents said higher business rates bills suppress investment, while more than half (53 per cent) said uncertainty around their future bills undermines their ability to commit to long-term investment.
The CBI said any savings made by reforms to business rates would be reinvested into the economy. Three in ten of businesses surveyed said they would put between 90 and 100 per cent of business rates savings into new investment.
Firms would use savings from a less burdensome business rates system to invest in productivity, automation, property improvements and recruitment, according to the survey.
The existing system operates as a “tax on improvement,” the CBI’s members said, because bills often rise after refurbishments, expansions and sustainability upgrades.
Companies also say it is hard to predict what changes to their property will do to their business rates bill, making it hard to plan long-term investments.
Business rates ‘penalise investment’
“That uncertainty is a growth killer, with vital projects being delayed, scaled back or cancelled,” according to Louise Hellem, the CBI’s chief economist.
The CBI has called on the government to remove a rule that means any changes to the business rates would have to ensure the total revenue from the tax remained the same.
Reform to the tax must “deliver real relief, not simply shuffle costs from one sector to another,” the industry body said.
The government should also improve transparency around the calculation of tax bills, and remove “cliff edges” within the system.
Hellem said: “Business rates are no longer just a cost of doing business – they’re a major tax on ambition and one that effectively penalises investment.
“Reform of the business rates system is no longer a ‘nice to do’, it’s an economic necessity.”