Rates hikes ‘holding back’ retail industry

shutterstock_328050179Business rates in Scotland are set to increase from Friday April 1, as the main poundage rate rises once again and the extra rates supplement paid by firms occupying medium and larger sized commercial premises is doubled. 

It comes as shop vacancies are mounting with one in every eleven retail premises in our town centres now lying empty, and with retail employment in Scotland having fallen by 3,500 last year.

Research published earlier this month by SPICe found that businesses are contributing a far greater share towards local authority funding than before. The research revealed that the tax revenue from business rates has risen by 42.5% over the past 7 years, in contrast to council tax revenues which have grown by only 7%.

In 2007-08 both business rates and council tax generated similar amounts, £1.860 billion and £1.890 billion respectively, with council tax then raising £30 million more in revenues than Business Rates. By 2014-15 however there had been a dramatic turnaround with business rates contributing £2.650 billion, some £628 million more than council tax.

From April 1 the main poundage rate will increase to 48.4p in the £, and the extra supplement levied on larger firms’ will be doubled to 2.6p. This doubling of the supplement is expected to add an extra £60 million each year to firms’ rates bills, and affect 1 in every 8 commercial premises in Scotland.

Commenting ahead of Friday’s rates rises, David Lonsdale, director of the Scottish Retail Consortium, said: “A thriving retail industry is a great route to better paid jobs, more commercial investment, a stronger indigenous supply chain and additional tax revenues.

“The industry is undergoing significant transition and retailers are seeking to respond positively with substantial investment in new technology, a more skilled workforce and better logistics. However, this is made all the harder by the rising cumulative burden of government-imposed costs which is an acute problem and is holding back investment.

“Increases in business rates have been wholly out of step with the other main local property tax, with rates tied to an escalator whilst council tax has been frozen. Retailers stump up a quarter of all rates paid and this is ratcheted up year after year with little or no regard to trading or economic conditions.

“The retail industry is facing profound change and other routes to market – notably online – are increasingly more attractive and far less costly than maintaining a ‘bricks and mortar’ presence of shops. This places a question mark over likely future tax revenues from business rates.

“We want to see all of Scotland’s political parties commit in their election manifestos to delivering a reformed and competitive business rates system which flexes with economic conditions.”

On the larger firms’ supplement Mr Lonsdale added: “Given existing concerns about Scotland’s relative economic underperformance compared to the UK as a whole and the pressing need to lift private sector investment, this hike in the supplementary tax is both odd and troubling.

“We’ve yet to hear a convincing explanation as to why firms operating from medium and larger sized premises in Scotland are better placed to be forking out more in rates than firms in comparable premises elsewhere in the UK.

“Our fear is that this Scotland-only surcharge could open the door to even higher business taxes in future if there is a shortfall in devolved tax revenues. It could also undermine support amongst firms in future Business Improvement Districts ballots, as BIDs are themselves funded by extra levies on rates.”

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