ROWS over business-rate hikes continue to engulf governments on both sides of the Border, with commercial organisations stepping up campaigns against the increases.
Ahead of a debate on the issue organised by the Scottish Government in Holyrood next Tuesday, the Scottish branch of the Confederation of British Industry has written to Finance Secretary Derek Mackay with proposals for a “fast-track” reform of the system they say would cost £500 million over the next five years, but which they say would result in additional tax revenue of £670m – exceeding the initial cost.
And Hugh Aitken, the CBI Scotland director, has warned that failure to take action could make Scotland a less attractive place to do business than the rest of the UK.
In its proposals the Confederation calls for the Scottish Government to look at introducing an exemption from business rates for new investment in plant and machinery and environmental efficiency.
In the longer term they say the revaluations should be every three years, rather than the current five years, and that it should be indexed to CPI to avoid unsustainable increases. They also call for the modernising of the system for billing and collecting business rates, in a bid to reduce administrative and compliance costs.
Aitken said: “Companies are struggling with the increasing burden from business rates, which are hampering efforts to create jobs and growth.”
He added: "The Scottish Government should consider removing productive investments in plants and machinery out of rates altogether, while also tackling the ongoing problem of Scottish businesses paying double through a large business supplement compared with those south of the Border.
“If the tax system in Scotland is not competitive we risk undermining the very foundations for economic growth while reducing the revenue receipts that the Government needs to invest in services and infrastructure. That’s why we would recommend that the Scottish Government looks closely at how it can fast-track reform in the near-term.”
The new rates, based on assessments carried out in the spring of 2015, come into effect from the start of April while former RBS chief Ken Barclay is leading a review into how the system can be improved that reports in the summer.
The Finance Secretary said: “We have engaged directly with business and retail groups, and responded to their concerns, which is why the draft budget recognises the business rates revaluation and proposes a competitive package of measures to reduce rates across Scotland by £155m.”
He added: “Next year, across Scotland, more than half of premises will pay no rates, 70 per cent will pay either no or less rates than they do currently and the total package of reliefs we are offering will increase to more than £600m.
“Additionally, this year we have increased the threshold for the large business supplement, meaning that 8,000 fewer premises will pay it.”
Meanwhile, in England, some of the country’s biggest business and employers groups have signed a joint letter to the UK Government criticising the rate hikes.
Thirteen organisations – including the British Retail Consortium and the CBI, the Federation of Small Businesses, and the Association of Convenience Stores – have called on the Treasury to scrap the tax entirely, saying they believe the rise might be illegal.
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