Welsh Government four year road map for business rates

Rebecca Evans, Welsh Minister for Finance and Local Government, has set out the road map for business rates for the next four year. This is what she reported to the Welsh Senedd.

“In February 2021 I published ‘Reforming Local Government Finance in Wales: Summary of Findings’. Alongside reforms to council tax, this comprehensive report explored how the non‑domestic rates system could be improved, considered changes to the current tax and looked at the potential for a more fundamental shift towards a land value tax.

“Non-domestic rates have been an important part of the local government finance system for more than 30 years. Ensuring vital revenue is collected to fund local services that we all use and securing a fair and sustainable contribution from businesses has always been a challenging balance to achieve. This is a constantly evolving situation and the Welsh Government recognises the need to review and adapt local taxation policy to meet existing and emerging challenges.

“On 7 December I announced our plans for significant council tax reform. Today I’m announcing a programme of non-domestic rates reform that will be delivered over the next four years. Our programme for government sets out the Welsh Government’s ambition for a fairer, greener and stronger Wales. These principles form the basis of any potential changes to the non‑domestic rates system.

“A crucial aspect of local taxation in Wales is the role played by local government. Their experience and dedication is integral to the effective collection and administration of local taxes. The incredible commitment of local authorities before and throughout the COVID pandemic has been central to delivering rates relief, business grants and council tax support. We will continue to work in close partnership with local government to reform the rates system, drawing on their extensive expertise and local knowledge.

“We will also continue to explore opportunities for reform with the Valuation Office Agency and the Valuation Tribunal for Wales. Devolution requires these valuation bodies to operate in new and innovative ways, delivering functions designed for Wales’s needs. The Valuation Office Agency operates across Wales and England, and it is vitally important that valuation functions evolve in line with the local tax policy aims of the Welsh Government. Work is under way with both the VOA and the VTW to explore and deliver new ways of working for Wales.

“One significant area for change is the revaluation cycle. We have listened to calls from stakeholders for more frequent revaluations, ensuring the tax base reflects the economic conditions and environment in which businesses are operating. We continue to explore how frequently revaluations should and could practically be delivered for Wales, taking advantage of opportunities presented by Wales’s unique tax base.

“Non-domestic properties across Wales are currently being reassessed for the revaluation that takes effect from 1 April 2023, and will reflect the impact of the pandemic on our tax base. We aim to bring forward legislation to move towards a three-yearly revaluation cycle, in line with other parts of the UK, and are exploring options for shorter revaluation cycles. This includes exploring the potential for reducing the gap between the valuation date and a new rating list coming into effect.

“A key requirement for more frequent revaluations will be the need to review and potentially further reform the appeals process in Wales. We’ll be taking initial steps to improve the current appeals process for April 2023, with further reform to support more frequent revaluation cycles in the future.

“We have made great strides in data sharing and analytical capability in recent years. This has provided detailed insights into how the rates system operates, and has been critical in making informed policy decisions in a rapidly changing economic landscape. We are further developing our data infrastructure as part of our reform agenda. This will help us and our partners to deliver wide-ranging improvements in targeting support and providing digital services for ratepayers.

“We will undertake a review of our rates relief schemes. Rates relief has played a crucial role in supporting businesses throughout the pandemic and the overall level of relief provided to ratepayers has grown significantly in recent years. But now is the time to step back and review all of our current schemes to ensure they’re fit for purpose and delivering support in the most effective way. Our review will consider the range of reliefs, the level of support, how reliefs are targeted and how long they last.

“During the fifth Senedd term, we made advances in addressing fraud and avoidance within the local taxation system. We revised empty property relief to reduce the scope for repeated cycles of rate relief. We also changed the rules on zero-rating for empty properties to allow local authorities to grant zero-rating only in cases where a charity genuinely needs to own or lease an empty building.

“The Local Government and Elections (Wales) Act 2021 provides councils with strengthened powers of investigation, including the ability to undertake property inspections and to request information from ratepayers and others. The Act also paves the way for a new duty on ratepayers to notify councils of changes in circumstances, something required of taxpayers under other tax regimes. I intend to bring forward regulations for April 2023. Our ambition to tackle fraud and avoidance remains strong and we will pursue further changes this Senedd term.

“While our current programme focuses on changes in the short and medium terms, some options for reform remain priorities for the longer term. We continue to explore the potential for a land value tax as a replacement for non-domestic rates, building on Bangor University’s detailed technical assessment last term. Over the next four years, we will move forward with the findings from this report, drawing on a wide range of expertise to develop a clear understanding of what such a significant change would look like for Wales and how it could work in practice. This analysis will include a potential road map for implementation.

“We are clear that reform should deliver local taxes that are demonstrably better for Wales, not just different from the current system. We have made significant progress in recent years and further developments will require close working with all our partners and extensive engagement with ratepayers.

“This significant package of rates reform will also require a combination of primary and secondary legislative change. I will work closely with the Senedd and stakeholders throughout the exploration and delivery of this ambitious package of rates reform and will, of course, keep Members informed of developments.”