SCOT-BUZZ editor BILL JAMIESON tells Enterprise Scotland – “it’s time to take a stand”.
Tens of thousands of businesses in Scotland are facing the penalty prospect of higher business rates compared with similar businesses down south.
This cannot be right.
Last week the UK government confirmed a radical review of the business rates system south of the border.
While good news for ratepayers in England, it does not apply to Scotland. This should concentrate minds in the Scottish Government, as it is no longer an option to say that fundamental reform is too difficult or complicated
A key argument for “more powers” to be devolved to Scotland was the prospect of creating a dynamic and competitive Scottish economy.
Central to that vision is a business tax regime that at the very least does not put Scottish business at a disadvantage.
But that is exactly what is happening now.
Scotland’s business rates system is screaming out for reform. You only have to look at the depleted state of many high streets in Scotland’s towns and villages, the vacant premises and the boarded up shops to see we have a pressing social as well as economic problem.
But business rates are set to increase once again from April. Planning application fees have risen by 25 per cent over the past two years, and water and sewerage charges are set to be levied on empty shops and commercial premises.
We need a wholesale review of our business rates system. It has failed to reflect the profound changes that have swept through the business world.
Our towns and villages are blighted by abandoned and boarded up shops. Empty business premises are left to rot. Our communities are hit.
Many businesses, struggling to cope with the recession and its aftermath, cannot cope with rising business rate demands.
Yet these continue to be levied as if nothing has changed – in particular the big changes in the shopping habits of millions of customers who have migrated to digital, online shopping.
Now we’re told of a new business rate rise in the pipeline. The Scottish parliament – where there’s barely anyone with a business background – has announced that the new Uniform Business Rate (UBR) for non-domestic properties is rising to 48p for 2015/16.
The increase, normally linked with the annual rate of inflation in September of the previous year (2.3 per cent in 2014), has been capped at two per cent.
That capping is welcome. But it leaves the fundamental burden unchanged.
The Small Business Bonus Scheme supplement payable on properties with a rateable value over £35,000 has been confirmed at 49.3p. For larger properties there will be an increase of 2.28 per cent.
You might think this is small potatoes. But consider this
The Office for Budget Responsibility, in its ‘Economic & Fiscal Outlook’ released last week, has calculated that tax revenues from oil and gas in the UK North Sea will fall to £700 million in 2015-16 and to £600 million in 2016-17.
At the same time the Scottish government is forecasting that tax revenues from non-domestic rates in Scotland alone will swell to £2.8 billion in 2015-16 – four times as much!
We rush out emergency support packages for the beleaguered North Sea – but on business rates, we pile on the agony.
Meanwhile, closure of multiple retailers (shops with more than five outlets) in Scotland continues unabated, with the rate running at six a week.
According to PwC research compiled by the Local Data Company (LDC), the net loss in multiple retailers in Scotland is more than double the 2013 total, as the high street continues its drastic overhaul in response to the advance of online sales and changing consumer demand.
The retail industry, which is a property intensive sector, is estimated to contribute around a quarter of tax revenues from business rates.
As David Lonsdale, Director of the Scottish Retail Consortium points out, “A failure to overhaul business rates, which are set to escalate once again next month, could lead to communities across Scotland missing out on investment in retail outlets and the jobs that they bring.
“It is why we want to see the collective energies of our politicians channelled into thinking radically about fundamental reform of Scotland’s business rates system, in order to make the retail industry and other sectors better placed to invest, expand and create employment.”
For some time the Scottish government has been increasingly reliant on more non-domestic rates income (NDRI) to boost its coffers, and less on council taxes.
According to a paper from Fiscal Affairs Scotland earlier this month, in 2009-10 council tax amounted to 5.6 per cent of the total revenues raised and NDRI to 5.7 per cent.
By 2015-16 the respective shares are estimated to be 5.3 per cent and 7.5 per cent.
“It would need”, says “FA, “an increase of around 50 per cent in council tax receipts to return them to the position of near-parity in 2009-10”.
Meanwhile the independent Scottish Fiscal Commission is seeking more evidence from the Scottish government to support the current projections of £2.7 billion for NDRI by 2015-16.
Local government is not currently exposed to any NDRI shortfall. But “this position”, warns FAS, “may change in the future.”
Our view at SCOT-BUZZ is clear. It is time we stopped treating business ratepayers as milch cow for every new spending wheeze and vote-catching political gimmick.
Business Scotland needs to unite and to campaign for a business rates review. And until that review is complete, we urge that the planned increase in non-domestic rates next month is scrapped and charges frozen.