Rethink strategy on business tax to boost trading

Last week the Scottish governments finance secretary unveiled a number of helpful measures on business rates. Picture: PA

For retailers large and small, a critical factor in planning for the future is the cost of property, which along with people, are the two greatest expenditures for retailers.

Firms tell me that their confidence to invest is being held back by the prospect of paying even more in rates.

The current system deters investment in existing premises because improvements attract a higher tax liability. Equally, it is a deterrent to taking on new shops, partly because the overall burden of rates has become too great and seems to only rise, but also because lower cost routes to market – for example, online – exist.

Retail is highly property-intensive and contributes one-quarter of all rates revenues, which are set to swell to £2.8 billion next year, up from £2.1bn five years ago. This comes as one in every 11 shops remains empty.

Last week the Scottish government’s finance secretary unveiled a number of helpful measures on business rates.

The headline poundage rate is to continue to match that which applies in England, and the £95 million levy on larger retailers is to be scrapped from next spring.

The levy was always deeply misguided, making it more expensive and less attractive for retailers to invest in Scotland than elsewhere in the UK, and the sooner it is consigned to history the better.

Confirmation of the resurrection of the Business Rates Incentivisiation Scheme (BRIS), which SRC proposed, is most welcome and should encourage councils to pursue a more business-friendly approach towards consenting the development of new or refurbished shops.

Scottish ministers have, however, missed a trick in not insisting that revenues accruing from BRIS are re-invested in town centre regeneration or funding the new local discretionary rates relief.

Welcome though these measures are, they should merely be a precursor to a more fundamental reform of business rates. Genuine reform could increase retailers’ confidence about investing in shops, create more jobs and help reinvigorate our high streets.

• David Lonsdale is director of the Scottish Retail Consortium