An influential group of MPs has called for a wholesale review of business rates to examine whether retail taxes should be based on sales rather than property value.

In its new report on the retail sector, the Business, Innovation and Skills Committee said the current business rates system was unfit for purpose and required fundamental reform.

In the meantime, it has recommended a six-month business rates amnesty for businesses occupying empty properties, which would encourage new businesses to the high street and go further than the 50% rates reduction announced in the Autumn Statement.

Committee chair Adrian Bailey MP said: “Business rates are the single biggest threat to the survival of retail businesses on the High Street.  Since the system was created the retail environment has changed beyond all recognition.  A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.

“The government’s consultation on the administration of business rates at least acknowledges that change is needed.  But this is a time for wholesale review and fundamental reform, not for tinkering around the edges.  Business rates are not fit for purpose and minor administrative changes will not alter that.”

The report also calls on the government to provide information on how much of the money allocated to the Portas Pilots has been spent, and how it is being spent.

“The Government allocated £2.3 million to fund the Portas Pilots, yet has not been able to provide evidence of how or indeed whether that money has been spent by local authorities,” the MPs said.

However, the committee was criticised for failing to draw attention to the weaknesses in the planning system.

Association of Convenience Stores chief executive James Lowman said: “We are disappointed the committee missed this opportunity to hold government to account over the weaknesses in the planning system that are undermining retailer confidence to invest in town centres. 

“We made clear in our evidence that any discussion on the future of retail cannot ignore the planning policy decisions that are preventing retailers from investing in our declining town centres.”

Recent research has shown that since the introduction of the National Planning Policy Framework there has been an influx of approvals for out of town developments.