MPs have called on the government to consult on alternatives to the “broken” business rates system ahead of the Spring Statement 2020.
The Treasury Committee’s report, the Impact of Business Rates on Business, also recommended that ministers review all business rate reliefs to ensure they are necessary and encourage investment.
It said the current relief system acted as a disincentive to investment, as investment can lead to an immediate business rates revaluation based on a presumption of increased turnover.
The report said further work was needed on the “numerous alternatives” to the rates system suggested by stakeholders, including a land value tax, online sales levy, profits tax, single consolidated tax and hybrid tax.
“With the changing nature of the economy, and with the high street in decline, the government must be curious, proactive and creative in exploring alternative options to such an important source of government revenue,” the report stated.
“The government should prepare a consultation on alternatives in time for Spring Statement 2020.”
The Valuation Office Agency (VOA) was also called on to urgently address delays in its appeal system Check Challenge Appeal (CCA). As of March this year, 16,000 appeals made to the 2010 listing remained outstanding, years after they were first raised, it said.
In addition, the VOA must ensure that, if the gap between revaluations reduces from five years to three years increases demands on the organisation, it is properly staffed to deliver its specialist role.
Commenting on the Report, Alison McGovern MP, the Treasury Committee’s lead member for the inquiry, said: “It’s abundantly clear that the current business rates system is broken. The tax represents an increasing burden on businesses, particularly those with a physical high street presence struggling to remain competitive.
“The government must ensure that business rates align with its aim to boost productivity and do not disincentivise growth.
“Odd reliefs here and there are nothing more than sticking plasters to a system in urgent need of reform.”
Welcoming the report, Association of Convenience Stores (ACS) chief executive James Lowman said: “We are pleased that the report has acknowledged the need for the rates system to encourage investment, rather than undermine it.
“It is vital that government policy works to support these businesses as they change in line with their customers and communities, providing the essential products and services they need, as they improve security through installing CCTV and other equipment, and as they increase efficiency and productivity through investment in technology.
“It is simply wrong that the current business rates system mitigates against this innovation and investment, and this report is an important contribution to the debate on how the system needs to change.”
Real estate advisors Colliers International also welcomed the report. Head of rating John Webber said: “The report also goes into some detail about criticisms of the current system and complexities particularly with regard to reliefs and methodology of valuation. While these are important points and need to be dealt with, at Colliers International, we are very much of the view that a reduction in the multiplier, an appeal system fit for purpose and a properly resourced VOA, would vastly improve the system.
“We applaud the committee for listening to the representations made and it is the duty of the next government to act swiftly on the recommendations within this report.”