The Business, Innovation and Skills Committee (BISC) has called for a “fundamental reform” of the current system of business rates, with the chair of the committee Adrian Bailey MP declaring the tax the “single biggest threat to the survival of retail businesses on the high street”.
The BISC, which was set up last year to examine the impact of the business rates system on retailers following the administration of Jessops, HMV and Blockbuster, has demanded a wholesale review that “goes beyond the administration of business rates”.
The BISC wants the review to explore whether retail taxes should be based on sales rather than the value of a property, whether retail needs its own system of business taxation and how often revaluations should take place.
The Committee has proposed a six months business rates amnesty for businesses occupying empty properties while a review takes place.
BIS said this move would go further than the 50% reduction offered by the government in the Autumn Statement, when Chancellor George Osbourne announced that business rate rises would be limited to 2% in 2014, instead of being linked to September retail prices index measure of inflation, which is set at 3.2%. The government also said the reform of business rates was on the agenda for 2017.
The BISC has also recommended that the Government should review whether business rates should be calculated using CPI or RPI rates, and called for annual increases to be linked to a 12 month average of either RPI or CPI, with a cap at 2%.
Adrian Bailey MP, chair of the Business, Innovation and Skills committee, said: “Amongst the many challenges they face, business rates are the single biggest threat to the survival of retail businesses on the high street. Since the system was created the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.
“The Government’s consultation on the administration of business rates at least acknowledges that change is needed. But this is a time for wholesale review and fundamental reform, not for tinkering around the edges. Business rates are not fit for purpose and minor administrative changes will not alter that.”
Bailey added: “The Government’s retail strategies are full of warm words that fail to address the most debilitating levy on existing businesses and the most crucial deterrent to new businesses appearing on the High Street – business rates. Fewer strategies are required, simple, decisive action is needed.”
The report also recommends that the government shares light on how much of the money allocated to the Portas Pilots has been spent and what the money has been spent on.
Bailey added: “£2.3m was allocated to the Portas Pilots amidst much fanfare. Yet the Government now cannot provide evidence of how or even whether the money has been spent. This is not acceptable and must be rectified.”
BRC Director General Helen Dickinson welcomed today’s report. “This report must be the final nail in the coffin of the question: ‘do business rates need to be reformed?’ They do. Business thinks so. A committee of Parliament thinks so. We very much hope the Government will think so too.”