The Great Business Rates Robbery

Tax shaming has become the focus of street protests everywhere in recent years. Google, Amazon and Starbucks are just some of the companies that stand accused of tax avoidance. But while there’s growing public anger over the financial affairs of multinationals, another scandal has been unfolding far from the headlines. And this is due not to a lack of Government action but as a direct result of it – and it’s the plight of small businesses being taxed out of existence.

So while Amazon was able to pay just 0.1 per cent of its UK revenues in tax in 2013, many small businesses have been unable to escape a punishing increase in business rates that’s left them unfairly over-taxed.

This is because the Tories cynically cancelled a revaluation of this outdated property tax knowing full well it would see an increase in business rates for London firms due to rising property values. In many other parts of the country, where property values have fallen, business rates would have come down.

So under the economic stewardship of George Osborne we’ve now got a situation where a chip shop in Rochdale is forced to pay more than three times its rent in business rates while luxury retailers on London’s Bond Street have been able to save £66million on their business rates bills as a direct result of the Government’s decision to cancel the rates revaluation.

Not surprisingly, this decision has hit areas where small businesses on the high street are struggling the most. Take the North West, for example, where almost one in five shops in towns and cities stands empty. According to recent research by commercial property advisor Bilfinger GVA, businesses in the region are now paying £682million more than what they would have paid had the revaluation not been postponed. It also reveals that over the same period London businesses have benefitted to the tune of £1.5billion. Is it any wonder that the economic recovery is barely being felt beyond the South East? Is this really what George Osborne meant when he promised to rebalance the economy away from London?

And the decision to cancel the revaluation has largely helped big business. The big four supermarkets have saved £1.3billion as a result. So small businesses are effectively subsidizing the likes of Tesco, Sainsbury’s, Asda and Morrisons.

To add insult to injury, buried in the small print of Osborne’s Autumn Statement last year, the Government made sure this injustice could not be challenged. What went unnoticed was the change to rating appeals, which meant the backdating of reductions on successful appeals against unfair business rates would now only be awarded to April 2015 instead of April 2010.

Effectively, Osborne has prevented an overpayment of tax being properly backdated.

Two years ago I carried out a review into the high street that was presented to Government. The message I heard loud and clear from small businesses was that rates were killing them. Traders had just experienced the biggest increase in 20 years under the Tories and I called for the immediate reinstatement of the revaluation along with urgent reform to restore public confidence in a tax that’s widely seen as unfair.

All of this naturally fell on deaf ears. At the time Mary Portas was doing a great job through her reality TV high street series to divert attention away from where the real problems lay and the Treasury’s vice like grip on the high street tightened. This was a cash cow they were determined to carry on over-taxing.

But squeezing the high street for short-term gains has disastrous consequences in the long term. Over £5billion has been added on to the business rates bill this Parliament and it will soon overtake council tax receipts, bringing in more than £30billion for the Treasury. It already generates more money than fuel duties and as long as this monster keeps growing, entrepreneurial potential in the form of small businesses on the high street will continue to be squashed. Far too many high streets simply have no chance of reinventing themselves and discovering a fresh purpose because prohibitive and unfair taxes act as a barrier to enterprise.

Taxation is steadily creeping back up the political agenda following Ed Miliband’s pledge to end non-dom status and there’s much talk of sweeping aside outdated tax laws that have existed since the colonial era. Business rates are another case in point. The fact that George Osborne has only just recognised that a review of a tax system that was implemented when the Tudors ran the country in 1572 is needed shows just how much of our politics remains depressingly rooted in the past.

Getting an immediate revaluation to restore some sense of fairness and stop small businesses being taxed out of existence should be a major priority for any incoming Government. Because it’s not just the injustice of the wealthiest businesses avoiding taxes we should all be concerned about. It’s time we got angry about small businesses at the heart of our communities being cheated out of a livelihood too.