Key facts
- Industry leaders are urging Prime Minister Andy Burnham to expand his business rates reform plans.
- A coalition of trade bodies proposes a 2% tax on all online sales.
- This new tax would fund a 37% reduction in business rates for physical stores.
- The proposed scheme aims to raise slightly more than the current £34bn generated by business rates.
- Nearly half of businesses surveyed reported an increase in their business rates bill since April.
Prime Minister Andy Burnham has been urged by industry leaders to expand his proposed reforms to the UK's business rates system, which they describe as "broken and unsustainable."
A coalition of trade bodies, including UK Hospitality, the Institute of Directors, and the British Independent Retailers Association, has called for a "hybrid" scheme that would introduce a 2% tax on all online sales. This measure, they claim, could fund a significant 37% reduction in business rates for physical high street businesses.
The Real Rates Reform Alliance, representing 2,800 companies, argues that the current system unfairly disadvantages brick-and-mortar stores compared to online giants. They propose that the new online sales tax would generate slightly more revenue than the £34 billion currently collected through business rates. Currently, retail and hospitality sectors, which form 9% of the UK economy, contribute approximately 34% of business rates receipts.
Burnham's existing plans include raising the threshold for 100% small business rates relief from £12,000 to £18,000, funded by increased taxes on out-of-town warehouses. However, some retailers have expressed concern that this could negatively impact high street sellers who utilize these sites.
Research indicates that the business rates system is actively suppressing growth, with 47% of businesses reporting higher bills since April. Consequently, 31% have increased prices for consumers, and 17% have reduced staff numbers. Allen Simpson, chief executive of UK Hospitality, stated that business rates are "actively suppressing investment and growth," leading to increased customer prices and negatively impacting job prospects for young people.