POLITICS
Making business rates fairer with Dutch inspiration
A
nnual revaluations carried out by local authorities rather than Government would make business rates fairer, according to an economic think-tank.
The Centre for Cities has set out a 10-point
plan of recommendations for how the much- maligned system can be overhauled as part of a Government consultation, which precedes a fundamental review, due to be published in the spring, of how the levy is applied. Business rates are collected on commercial
property and linked to the estimated underlying rental value of the premises. But the tax is widely regarded as outdated because it penalises companies that need a presence in town and city centres, where property values are higher, resulting in them paying more in rates than online rivals. Kathrin Enenkel, a senior analyst at Centre for
Cities, said: “Currently, revaluations are infrequent. This means that rates are paid based on property values that can be as much as seven years out of date. And this causes a number of problems.” “The first is that it creates a cliff edge when
valuations finally occur as assessments must catch up with how the market has changed over the previous years.” She said the current phased-in approach to
new tax liabilities means businesses that have been underpaying for years benefit from staggered increases, but those overpaying will continue to overpay as transitional relief staggers the fall in rates due.
Kathrin Enenkel
This is at odds with the levelling up agenda as northern businesses have been more likely to have seen drops in their rateable value, and therefore continue to overpay, while those firms in the South are effectively being subsidised by these characteristics of the tax. A third issue highlighted is that recent changes in demand for bricks and mortar retail have meant the lack of revaluation has resulted in shops partially subsidising warehouses.
DUTCH INSPIRATION The Centre for Cities’ annual revaluation recommendation is based on many changes in the Netherlands when it went through a comprehensive reform of its overly complex business rates system in the mid-1990s.
Andrew Carter
By moving property valuations from every four years – which disincentivised growth – to annually, and taking local market information into account alongside property-specific details, the number of appeals have reduced by 80% and the costs of valuations were cut by 20%. Speaking at an online briefing of the Reforming Business Rates report, Centre for Cities chief executive Andrew Carter said: “We deliberately looked at the Dutch model because it shows us the system can be reformed to make it more efficient, more timely, less complex and more responsive.”
BCC RESPONSE TO BUSINESS RATES REFORM Dr Adam Marshall (pictured opposite), director- general of the British Chambers of Commerce (BCC), welcomed the Centre for Cities recommendations during the online discussion. He said: “The business rates system does
The Netherlands put annual revaluations at the heart of its business rates overhaul in the mid-1990s 60 business network December 2020/January 2021
remain fundamentally broken. It creates so many disincentives for investment, it’s a burden on many businesses regardless of their ability to pay and makes no allowance for structural changes that have taken place in the UK economy. “We all know it doesn’t work for local economic needs or at national level.”
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