The government has dismissed MPs’ recommendations to consider alternative revenue sources to business rates, such as an online sales tax, claiming the burden of rates does not fall unfairly on retailers.
Responding to the Housing, Communities and Local Government Select Committee’s High Street 2030 report, ministers said it was “right that the government continues to tax commercial property, and that this is done through business rates”.
It said it was unclear that an online sales tax (OST) would benefit high street retailers, and that it did not want to deter high street retailers from increasing their online offer, including click and collect.
A Green tax would likely feed through to consumers and detract from the benefits of deliveries, ministers added.
However, the government suggested it would consider the MPs’ recommendation to provide a 12-month rate freeze for high street retailers who invest in their properties.
“The government is aware of similar reforms being recently introduced in Scotland, and we are monitoring it with interest,” it said.
But the government ruled out the committee’s suggestion to reduce rates for high street and town centre retailers to level the playing field with out-of-town retailers.
“It would be very challenging to limit business rates cuts to high street as opposed to out-of-town retail as the distinction is difficult to define, especially given that many retail parks and shopping centres are located within towns,” it said.
“State aid rules would also restrict the government’s ability to support or discriminate against particular business sectors.”
Commenting on the report, the Association of Convenience Stores said the government’s response did not address the argument that business rates penalise investment.
“This response doesn’t get to the heart of the problem with the business rates system: it penalises businesses for investing,” said ACS chief executive James Lowman.
“There needs to be a cross-government effort to make this system work before it damages high streets and the economy even further.”
The government said it recognised that business rates can “represent a high fixed cost to some businesses,” but reductions announced since 2016 were worth more than £13bn to businesses over the next five years.