No, is the short answer. At least not soon enough for JLP, which looks set to close more department stores, or shopping centre chain Intu, whose shares are effectively worthless, or the countless other retailers who cannot extract themselves from long leases or have little bargaining power, and whose ever-upward business rates are in inverse proportion to footfall.
So it’s no surprise Chancellor Rishi Sunak is rumoured to be looking at LVT in next week’s Budget. Unlike the invidious business rates system, with LVT, retailers (and manufacturers) would not be punished for investing in their property, whether that’s an ATM or solar panelling.
Trouble is, quite apart from the time it would take to review, LVT would be a near-impossible tax to collect.
So what are the alternatives? An online sales tax, as Tesco CEO Dave Lewis proposes, would address another invidious aspect of business rates: the minimal contribution of certain online players. But as bricks-and-mortar stores move online, a 2% tax on online sales seems counterproductive, and wouldn’t address wider iniquities around business rates themselves, like the valuation lag, or transitional relief, and puts a continued focus on land in a digital and virtual age.
Nor will a digital sales tax help: not if we want to strike trade deals with the US, or avoid more Trump tariffs.
So attention continues on how to fix business rates - with calls not only to sort transitional relief but introduce more regular valuations, or offer greater transparency on rent, or relief on investment. Trouble is, you can’t solve the business rates conundrum within business rates: it needs a different tax. And we already have a solution in place: VAT. It just needs bumping up a bit. We would need to iron out all the peculiarities (fruit salad vs fruit smoothie), inconsistencies (what is a Jaffa Cake?), and injustices (a tax on tampons, really?) but it’s time to give VAT a fresh look.
In a post-Brexit world, we can set our own rates on VAT. If you increased it to 22% you could halve business rates across the board, at no extra cost to the Exchequer. And you could remit the 2% locally to replace the lost business rate revenue. Since there is no overall increase in the tax take, it won’t lead to an increase in prices. And should the government so wish, it could send more money to poor councils as the ratio of business rates to retail sales is lower.
The government could also use VAT in a progressive way to encourage good behaviour, whether on environmental or health grounds.
Of course, after five years the OECD needs to make some progress with international tax agreements. But VAT is an elegant solution: easy to collect, and a fairer reflection of the modern economy. But there’s a catch. The Conservative Party manifesto promised VAT would not increase. As the Institute of Fiscal Studies put it: “That’s a constraint the Chancellor may come to regret.” It’s one retailers may come to as well.
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