By Stuart Hicks, Director
The Rating Surveyors’ Association (RSA) has published its response to the Government’s current inquiry on how business rates policy has impacted business with some interesting recommendations.
The latest inquiry was set up to look at how changes in Central Government policy have affected the business rates system and, in turn, how the current business rates system is operating and impacting on business.
In his submission the RSA President Tom Emlyn Jones presents three controversial recommendations but delivers them in a well thought out argument. They are:
1. Agricultural property should lose its exemption from non-domestic rates allowing the cost of the tax to be reduced due to a larger tax base; and secondly
2. A phased removal or reduction of charitable relief; and
3. The removal of small business rates relief due to it being rentalised in higher rents.
At the outset the RSA report makes an excellent point; the UK has had a property tax for over 400 years and taxes on immovable property (land) are generally regarded as good for several reasons:
a. Property taxes are difficult to evade because land does not move; the tax base, unlike people or money, cannot be moved from one jurisdiction to another as a response to a change in tax.
b. Landed property cannot be hidden, unlike for example people or monetary wealth.
c. The collection rate of property taxes is usually high because of the difficulty of evasion.
Calls for alternative taxes such as online or sales taxes are much more ethereal in jurisdiction – simply put, it is very hard to hide a building from the tax man.
Back to the inquiry and report. The report runs to 14 pages and makes some very salient points. Rather than regurgitate it all, you can download it yourself RSA Response To Government Inquiry Into Business Rates. But here are some of my favourite points:
· Government should take action to allow the system to work smoothly, rather than introducing measures that are distorting and complicating.
· Revaluations should be more frequent reflecting changes in the property market.
· The Council Tax system is out of date which naturally puts pressure on the non-domestic rates system.
· The rate in the pound is now approximately 50p in the £ rather than 33.33p which was planned when the system was introduced and this is despite significant increases in rateable value.
· The high rate poundage encourages appeals and general disquiet.
· Transitional relief and other exemptions and reliefs distort and corrupt the system.
· Empty rates are an acute burden where occupiers are struggling.
· Non-domestic rates should be as originally envisaged, a tax on occupation.
· Government needs to properly fund the Valuation Office Agency.