Retail leaders have urged the government to consider “radical” alternatives to business rates, including replacing them with a new tax based on businesses’ energy efficiency.
Under the proposal, from the British Retail Consortium, businesses would get a rates discount if they could prove their premises had green measures to tackle climate change.
The BRC also floated the idea of doing away with the current property-based system in favour of a scheme that reduces rates for businesses employing larger numbers of staff.
A third suggestion is the concept of discounted rates bills for those paying the most in Corporation Tax, although the BRC denied its proposals were skewed towards larger companies such as the supermarkets.
The proposals, set out today in a document called The Road to Reform, were fronted by John Rogers, chief financial officer of Sainsbury’s, who has chaired an executive level group to look at alternatives to rates, in conjunction with accountants Ernst&Young.
“We’ve not done this just so that firms that employ loads of people can get a free ride”
Rogers said the plans had been drawn up in initial talks among a wide cross section of BRC members, which he claimed was made up mostly of small businesses rather than supermarkets.
“We’ve not done this just so that firms that employ loads of people can get a free ride,” added BRC director general Helen Dickinson.
The BRC has promised to come up with more detailed proposals by May but said it wanted the Treasury, which has launched a review of the administration of the rates system, to realise that its problems could not be solved by “tinkering around the edge”.
“We’re looking for more radical reform that just modernising the existing system,” said Rogers, who claimed that all the proposals would be “at least cost neutral” for the Treasury.
“There is a fundamental sense that the business rates system as we know it is no longer fit for purpose,” added Dickinson.
She admitted that the proposal for a new green tax was “at the fundamental end” but said the BRC and EY had been deliberately “thinking outside of the box”.
Retailers currently pay around £7bn of the annual £25bn rates bill, according to the consortium.
“The system is outdated and cumbersome and does nothing to encourage retailers to invest,” said Rogers. “We believe we can do better for business and for tax payers and these options represent tangible progress in the debate on what reform could look like if we think about retail in the future, rather than the past.”
But former Iceland boss Bill Grimsey, who wrote his own report on the UK high street last year, said it would be wrong to change the current system to a tax based on energy usage without extensive consultation with British manufacturing, as this would hit such businesses hard.
“This is a report that’s written for the big four supermarkets by one of the big four supermarkets and the main beneficiaries will undoubtedly be the big four supermarkets,” he added.
“It is quite clear looking at some of their recommendations that they’re devising policy to cut their bills.”