Andy Burnham should tax online sales as part of a complete reform of Britain’s “broken and unsustainable” business rates system as firms come under increasing strain, according to a coalition of business groups.
The Real Rates Reform Alliance – which launches on Tuesday and includes the likes of UKHospitality and the Institute of Directors – is calling on the Government to scrap and replace the current controversial property tax with a new “hybrid” system to even the playing field for under-pressure high street firms.
The group, which represents more than 28,000 firms and business leaders, wants all online sales taxed at 2%, which it said would allow a 37% cut in business rates for bricks and mortar firms.
This would be a “major shot in the arm” for many high streets and communities which it said have been forced into cutting jobs, investment and raising prices due to the pressures of rising business rate bills, according to the alliance.
It would also raise slightly more than the £34 billion a year currently raised through business rates, the group said.
Mr Burnham, who is expected to become Prime Minister as soon as next week, has already pledged to reform business rates should he become Labour leader.
The former mayor of Greater Manchester has signalled plans to cut rates for firms through higher property taxes for large warehouses, particularly targeting online giants such as Amazon.
But the Real Rates Reform Alliance said he needs to “go further” as new research lays bare the impact of the property tax, with more than half (55%) of firms saying business rates are now a major or moderate cost to their business and the same proportion are concerned over the impact on their performance.
Ros Morgan, chief executive of Heart of London Business Alliance and chair of the Real Rates Reform Alliance, said: “Business rates should support growth, not hold it back.
“Andy Burnham has already acknowledged the current system isn’t fair and talked about levelling the playing field between online and some physical businesses. We want him to go further.
“By bringing together a broad coalition of business organisations behind a practical, credible solution, we want to work with Government to seize the opportunity of lasting reform that protects high streets, supports investment and creates a fairer tax system for the modern economy.”
Mr Burnham’s proposals, first outlined during the Makerfield by-election campaign, would see a 50% increase in the threshold for 100% small business rates relief in England, from a rateable value of £12,000 to £18,000.
It would also extend the upper threshold at which firms receive tapered relief up to £21,000, from £15,000 currently.
Anna Leach, chief economist at the Institute of Directors, said “the time has come for fundamental reform”.
According to its calculations, the coalition estimates digital firms pay 9% of total business rates, despite accounting for a fifth of economic activity, while retail and hospitality firms contribute 34% of business rates and only make up around 9% of the UK economy.
The group – whose members also include the Association of Town and City Management, the Music Venue Trust, the British Independent Retailers Association and Heart of London Business Alliance – said a poll of 1,000 firms by Savanta found around one in six (17%) have cut jobs in response, while 15% have put in place hiring freezes, and nearly a third (31%) have hiked prices.
The CBI business group and Energy UK also on Tuesday stepped up pressure on the Government to cut energy costs for companies ahead of Mr Burnham’s expected appointment, claiming it could unlock an extra £130 billion of economic activity by 2050.
They want the incoming prime minister to make tackling high energy costs for firms an “immediate priority” and to work with industry to work with industry to deliver a comprehensive national strategy to stop growth being held back.
