Big four face 22 per cent tax rate hike

JOHN Swinney, the Finance Secretary, has been accused of “picking the pockets” of the big four retailers in Scotland as new figures show that they are facing a 22 per cent rise in rates under the Scottish Government’s proposed “son of Tesco tax”.

Property specialists have also lambasted the proposed levy as “madcap” because retailers could wiggle out of paying by giving up selling tobacco. Taking this drastic move could leave a massive gap in the Scottish Government’s budget which expects to raise £110m from the levy to fund health and social programmes.

The government aims to raise £30m by 1 April by raising rates for retailers with properties worth over £300,000 rateable value and that sell both tobacco and alcohol, with the levy set to rise further to £40m in 2013 and 2014.

Although guidelines have yet to be set out in detail, property agency Ryden estimates that 242 stores will be hit hardest, paying an average of £124,000 this year and increasing to £165,000 the following year.Tim Bunker, a ratings specialist and partner with Ryden said: “That’s a hell of a lot just to sell some cigarettes.”

Tesco will suffer most with an extra £10m bill to pay by April. But Bunker says the loopholes might be too tempting for retailers and they could drive all tobacco sales out of the supermarkets and into smaller shops. “It is not terribly well thought through,” he said.

“Tesco will work out they don’t make £10m in profit on cigarettes – people go there to buy necessities like food. So they could easily clear their shelves and save themselves £10m in one fell swoop. The supermarkets probably don’t sell that many cigarettes anyway.”

He added that supermarkets with petrol stations could continue to sell tobacco at these shops, as those properties are valued separately from the supermarket.

“What happened if they all stopped selling cigarettes? Then the government doesn’t get any money at all. The crazy scenario is that people do their shop in the supermarket then pop around to the corner shop to buy their cigarettes.

“Because of the £300,000 limit, that has been set to hit the big supermarkets. It is nothing to do with health. If it was something to do with health, it would be every shop that sold cigarettes.”

Richard Dodd, a spokesman for the Scottish Retail Consortium, said: “These findings confirm that this is a discriminatory tax, and any claims it is really about public health are entirely spurious. What it is doing is picking the pockets of a very small number of high profile businesses.

“If it was actually about public health it would include all retailers involved in selling these products and other businesses in the supply chains.”

A Scottish Government spokesman said the levy has received broad support the Scottish Licensed Trade Association, the Federation of Small Businesses, health bodies and the STUC.

The spokesman said: “The estimated income of £30m in the first year followed by £40m each year thereafter will be used to contribute towards the preventative spend measures that will be taken forward jointly with the Scottish Government, Local Authorities, the NHS and the Third Sector.”

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