David Lonsdale: Empty property tax might make a bad situation worse
A RECESSION is an odd time to be raising taxes on business, but that is what MSPs are being asked to do today.
The Scottish Government’s Local Government Finance (Unoccupied Properties) Bill is expected to be voted on this afternoon at Holyrood. A key element of the legislation involves increasing the business rates paid by firms with empty commercial premises by £18 million a year.
It is in the interests of business and government to see as many properties occupied as possible, and CBI Scotland supports efforts to boost demand for empty retail, commercial and licensed premises. However, penalising companies with empty or un-let buildings – which are already suffering the ill-effects of a sluggish economy – is the wrong approach. As they stand, the proposals represent a “tax on distress” and could make a bad situation worse.
When the finance minister unveiled this new tax he said it would “incentivise” the use of empty properties, but for many firms it feels more like a stick than a carrot. After all, commercial premises are rarely left empty on purpose as they do not generate an income.
Indeed, in its recent report on the bill, the parliament’s finance committee rightly rebuked Scottish ministers over the lack of any evidence behind the assertions that the measure will improve occupancy rates.
Our members fear this tax rise is the thin end of the wedge, that it will affect their cash flow and put off much-needed private sector investment, particularly in regeneration areas where it can prove more difficult to find tenants for properties.
If developers are deterred from investing in new retail and office developments, this could curtail future economic growth as demand returns to the economy.
Increasing firms’ costs and making it more expensive for them to invest and create jobs is rarely wise in the good times, let alone now. In this new parliamentary session, CBI Scotland is asking MSPs to test all policies against a single benchmark: will it help to deliver economic growth?
In this case, the answer is no, and MSPs should bear this in mind when casting their vote.
• David Lonsdale is the assistant director of CBI Scotland.
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