AS the independent Commission on Local Tax Reform formed by the Scottish Government met for the first time yesterday, concerns were expressed that another form of taxation was being ignored.

The new Commission will not consider the issue of national non-domestic rates, commonly known as business rates, which raise £2 billion annually – the same as the total amount gathered in council tax at present.

The Federation of Small Businesses and other organisations have expressed dismay that non-domestic rates are being pushed down the order for consideration, especially as rates are a growing cost to small businesses.

Business rates are set nationally but are calculated on the rateable value of a property. Rateable values are calculated on the notional rental value of a property, and many Scottish businesses and their representative advisors and organisations have complained about the fact that the last ‘tone date’ – the month by which those rateable values are calculated – was April 2008, just before the financial collapse triggered the recession.

The Scottish Government compounded the unfairness, say those campaigners, by postponing the expected 2015 revaluation to 2017.

Peter Muir, director with property specialists Colliers International, said that as a result of rates staying high while income is down, in some towns in Scotland, business rates have become a major expense for companies and sole traders.

Muir said: “It used to be that your main expenditure was staffing, then rent, then rates, but nowadays in many towns, business rates are the second biggest expense.

“There were extensive consultations on non-domestic rates in 2014 and there are more ongoing about the non-domestic rates appeal system but we have not heard a peep about what will happen.

“I don’t think there will be any change until the 2017 revaluation, and I think they will certainly take their time to consider the latest consultations on the appeals system as a lot of papers have gone in to the Government.”

Responding to the announcement that the Commission on Local Tax reform will not have a remit to consider non-domestic rates, Eric Forgie, chairman of GVA James Barr, said: “The basis of council tax is entirely different to that for non-domestic rates, so I am not unduly concerned that this newly formed commission is focusing on changes solely to the council tax model.”

The Scottish Government has said it is determined to modernise the Business Rates valuation model. Consultations and proposals are running in parallel with a similar review being undertaken by the UK Government dealing with the system in England Wales and Northern Ireland.

A consultation on the Business Rates appeals mechanism is under way and submissions are due to the Scottish Government by March 6.

Peter Muir added: “In the final analysis, non-domestic rates are a property tax, indeed the original property tax in Scotland as they have been with us since 1854.

“They raise a lot of money for the Scottish Government, but the problem we have at the moment is that the economy went upside down and notional rental values have fallen substantially.

“The next ‘tone date’ is April, and I don’t see the economies of many towns in Scotland turning the corner before then.”

Minister for Business, Energy and Tourism Fergus Ewing said: “The Scottish Government is already through its business rate policies delivering the most competitive business tax environment in the UK – with the Small Business Bonus Scheme alone reducing or removing taxation for two in five premises, as part of a package of relief worth an estimated £594 million.

“We are legislating for councils to be able to award further rate relief in their areas later this year, and also keeps the business rates framework under review ahead of the 2017 revaluation, reflecting the important feedback received from ratepayers.

“Improvement actions include new powers for councils to offer local rates relief, public consultation on the valuation appeals system and forthcoming review of empty property relief.

“When we came to power in 2007 one of the very first things we did was provide a better deal for the small businesses in Scotland.

“So now over 92,000 small businesses pay low or no business rates.

“We will keep this policy in place.”