Are business rates fit for the digital age?

Business rates seem to be continually in the news at the moment. The advent of online business models that can operate with a smaller physical presence has led to criticism that some businesses are being taxed unfairly. At the same time, the system for assessing the tax liability can be extremely complex, difficult to understand and correspondingly costly to navigate. As business rates don't scale with ability to pay - at least not immediately - rates bills can cause real hardship for some businesses. Indeed in some sectors business rates can be one of the largest fixed costs.

Property tax raises significant revenues for government and the proportion of business taxes represented by rates has been growing over time. Government are unlikely to want to materially reduce dependence on a tax that has consistently and reliably contributed to revenues over time. But could the system be reformed to operate more efficiently or to distribute the burden more fairly?

Read ICAEW's report Business rates: maintain, demolish, rebuild or refurbish for more.

What do you think - should business rates be reformed for the digital age?

  • Charges at present levels will continue to accelerate the demise of the bricks and mortar retail sector, no doubt about that.  If this government is happy with that, so be it.  In the small shops sector, one often sees a shop close with a notice in the window saying the trader has moved wholly on-line.  These small units cannot all be occupied by charities.  There are secondary shopping areas where many shop-fronts have been filled in with a front door and windows!!  The space is far more valuable as residential and landlords know it.  Once a few units change over, the footfall reduces and within ten years or so all the commerce is lost.  Government will note that council tax is much lower than business rates and that there is no barrier to the change of use.

    Further, in some regional areas business rates are higher than rents, because of the difficulty of obtaining fair RVs.  This problem has been much enhanced by the changes to the appeals procedure, which make appeals far more costly and time-consuming.  Government doesn't want people to appeal, because they know many RVs are far too high.

    Equally clearly, government needs to find a way to tax the on-line economy.  Since it will be difficult to compel overseas companies to submit accounts and costly to check them, an enhanced sales tax is probably the answer, reinforced by banning uncompliant traders from business and making it illegal to buy things from them.  It has been said that a sales tax is regressive but why, if the seller pays it why is it more regressive than corporation tax?

  • Well, as for me, co-working is more suitable for the digital era, but this does not mean that being IT people you cannot run your business. I personally do web design, develop websites on the similarity of this and I want to say that it brings good money, in the future I plan to open my own small company. Therefore, the choice is yours.