DEBATE: Should business rates be scrapped and replaced with a land tax, as the Lib Dems suggest?
Should business rates be scrapped and replaced with a land tax, as the Lib Dems suggest?
Liz Jarvis, writer, editor, and Liberal Democrat parliamentary candidate for Southampton Itchen, says YES.
Nearly a million businesses in the UK have closed in the past three years. Businesses, especially small firms unable to bear the brunt of Brexit uncertainty, are failing, and the demise of the high street is clearly visible all over the country.
Many local business owners have told me that the reason they are forced to close is because of escalating business rates.
This can have an incredibly negative impact on local communities. We need to support our entrepreneurs and SME owners, and ensure that hard-working people don’t lose their livelihoods.
That’s why the Liberal Democrats are proposing to replace business rates in England with a commercial landowner levy, which would be based solely on the land value of commercial sites rather than their entire capital value.
The burden of taxation would shift from tenants to landowners, making the tax system fair for everyone. It would stimulate investment, breathe new life into our high streets, and enable the local economy to thrive.
Sarah Collins, director of RIFT Research and Development, says NO.
At first glance, scrapping business rates will be received well by small business owners. But there’s a problem: it needs to be paid for, and to the tune of around £25bn each year in typical tax revenue.
The Lib Dem solution is to tax commercial landlords, which is all well and good until you realise the following.
Local councils are dependent upon business rates to fund local services. Any funding gap brought about by a miscalculation or by landlords simply domiciling their assets elsewhere would leave neighbourhoods bereft of support for things like affordable homes, social care, play areas — all of which the Lib Dems say they stand up for.
These same commercial landlords — the likes of British Land and Land Securities — are also invested in by pension funds. Tax them until the pips squeak, and returns will diminish and pension pots will shrink. This will again impact the very same people whom Jo Swinson says she’s looking out for.
While well intentioned, this clumsy policy has potentially disastrous unintended consequences.
Main image credit: Getty