Treasury rejects retail’s calls for business rate reform

The UK government is resisting pressure from retailers to reform business rates, saying that it has already made changes and that reforming international corporate taxation is a higher priority.

Responding to parliament’s Treasury select committee, chancellor Philip Hammond said that a review of business rates in 2016 found “no consensus on an alternative base”.

“Respondents agreed that property-based taxes were easy to collect, difficult to avoid, relatively stable compared to other taxes and had a clear link with local authority spending,” he said in a letter to Nicky Morgan, who chairs the committee.

The rebuttal comes after growing calls from the retail industry for reforms that would help redress the disparity in rates between bricks-and-mortar and online shopping. Retailers pay about £8bn in business rates each year and are already battling weak consumer sentiment and increases in other costs.

The New West End Company, which represents business owners in London’s West End, has called for a revenue-based tax on online retailers that it said would allow for a 17.5 per cent cut in business rates at no cost to the Treasury.

Sir Peter Rogers, chairman of NWEC and a past head of Westminster council, said business rates account for 45 per cent of retailers’ tax bills. “The current structure . . . provides online retailers with an unfair advantage and a 90 per cent discount in an already struggling bricks and mortar retail environment.”

Conservative MP Neil O’Brien, a former Downing Street adviser and co-founder of the Onward think-tank, has proposed a 3 per cent sales tax on companies such as Amazon and eBay, saying the £500m it would raise could be used to help high streets.

The British Retail Consortium does not support such a levy, saying that it could hurt “bricks-and-clicks” businesses such as Next or John Lewis — which have physical stores and a growing online offering. Earlier this week, the BRC instead proposed a two-year freeze on business rate rises and a fundamental review of business taxation.

In his reply to Ms Morgan, Mr Hammond said that “we need to find a better way of taxing the digital economy.

“It is right that we make further progress on this issue before considering the implications for the wider tax system.”

Ms Morgan said the committee was “increasingly concerned” about the financial burden placed on high street businesses and that it would “like to scrutinise business rates further as part of our Autumn Budget inquiry later this year”.


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