Business rates up a third but Corporation Tax take down: CBI report

Figures out from the Confederation of British Industry last week show the significance business rates are now playing when it comes to tax funding for the country.

Business rates’ revenue has increased by a staggering 27.6% over the last seven years, a figure that is made to look even worse when compared to corporation tax which has dropped by 7.1% over the same time line.

The CBI say that SMEs are struggling to survive under this BR burden and is now calling for the Government to ensure business rates’ reform is listed high in the next budget, due in only a few weeks.

Other tax revenues that have increased include: Income Tax, up by 7.4%; fuel duties, up by 9.2%, and National Insurance contributions by employers up by 10%. Only Corporation Tax has registered a fall – surely fanning the flames on the tax dodging accusations levelled at big business?

The CBI figures were compiled using statistics obtained from the Government’s own Office for Budget Responsibility. It showed the revenue raised from business rates has gone up by almost 28% in the past seven years – far faster than any other tax.  Business rates go up automatically in line with inflation under a system which business owners – particularly those with smaller companies in traditional high streets – claim doesn’t reflect their ability to pay.

The knock-on effect of high business rates makes investment in new commercial property unappealing in hard hit parts of the country where property demand is lower, resulting in sub-standard business premises.

The CBI now want to see all companies with premises which have an RV of £12,000 or less to be excluded from having to pay business rates. That policy would lift an estimated 1.1 million companies, from a total of 1.8 million, out of the tax net.

The CBI’s research also shows that high rates are driving many property owners to sell or convert commercial premises into residential property. The amount of commercial property being converted into residential increased by 80 per cent last year alone.

This is probably one of the hardest-hitting attacks that the CBI has launched against the Government and the timing is no accident. They were very dismissive of reforms announced by Osborne back in October when he set out plans to give local authorities the power to cut business rates and it sounds like they are getting impatient – probably like the rest of us – with the lack of progress when it comes to a fundamental reform of the BR system.