Business rates must be scrapped to prevent a catastrophic collapse of the high street, says major report
Business rates must be scrapped to prevent a catastrophic collapse of the high street, a major report demands today.
In a stark warning that towns and cities face ‘their greatest challenge in history’, the study calls for a review into the damage the punitive tax is doing to traditional shops while internet retailers thrive.
About 50,000 shop staff face losing their jobs because of store closures this year – making it the worst period for the high street since at least 2012.
Retailers are closing, striking emergency rescue deals and going into administration at the fastest rate since the financial crisis, with the failure of at least 25 major shopping chains so far this year.
Experts say the end is nigh fpr high street shopping as internet shopping prospers
Today’s report, written by former Iceland and Wickes boss Bill Grimsey, warns that urgent reform is the only way to prevent the situation from spiralling out of control.
Mr Grimsey said: ‘Our cities, towns and communities are facing their greatest challenge in history, which is how to remain relevant, and economically and socially viable in the 21st century.’
It comes after the Mail launched a bid to save the high street, with reform of rates, lower parking charges and fair taxes on giant foreign tech firms at the heart of our manifesto.
Separate figures from the Centre for Retail Research reveal that 60,932 stores closed down between 2012 and the end of 2017 – or 15.7 per cent of the total – as online retailers vastly increased their share of the market.
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The CRR warned that another 31,000 shops will go in the next five years, with up to 382,500 jobs lost.
But despite fighting to survive amid an unprecedented squeeze, bricks and mortar shopping firms have to cough up £7.2 billion a year in business rates versus just £457 million paid by the online rivals which are ruthlessly outcompeting them.
Mr Grimsey says the rates system has proved a disaster for businesses.
His report warns there is no longer any confidence in business rates, under which shops and other companies are taxed based on how much their buildings cost to rent.
The tax is particularly punishing for high street firms because they tend to occupy prime locations in town and city centres, and pay far more than internet companies reliant on out-of-town warehouses.
Mr Grimsey says alternatives such as a tax on firms’ sales should be introduced instead.
His report says: ‘Business rates have grown into a massive tax collection vehicle. This colossus has grown and grown, and it does not reflect the additional costs to provide services to those businesses any more.’
The new report also calls for landlords to face penalties if their shops are empty for more than six months; a cap on parking charges to lure in shoppers; and councils to get more power over how their town centres are designed.
MPs on the Treasury select committee yesterday demanded major change so that online retailers no longer get an easy ride compared to traditional high street stalwarts.
Giving evidence to the committee, Richard Allen, of campaign group Retailers Against VAT Abuse Schemes, said HMRC deliberately took a lax approach to online retail behemoth Amazon.
Independent MP Charlie Elphicke asked him: ‘Do you think there is a concern that online retailers like eBay and Amazon have an unfair competitive advantage over high street businesses that pay business rates, that pay their taxes, that employ people in Britain, where these enterprises don’t?’
Mr Allen said: ‘The regulatory environment in which these online businesses operate is not as tough as the regulatory environment for high street retailers.
‘There are other issues with business rates and other advantages where warehouses aren’t charged the same as a high street shop.
‘There is a huge imbalance between online retail and high street retail.’
Calls for reform were also backed by fellow committee member Simon Clarke, a Tory MP. He said: ‘The recent spate of job losses on the high street suggests something has gone seriously wrong with our business rates arrangement.
‘It poses the question of how we tax business fairly so that online retail pays its fair share.’
The bosses of some of Britain’s biggest chains also support the Mail’s campaign.
Kevin O’Byrne, chief financial officer at Sainsbury’s, last night said the chain was Britain’s seventh-largest taxpayer despite being only its 75th-biggest public company.
Mr O’Byrne said the supermarket paid £550 million a year in business rates – which is more than the £409 million profit it made in its last financial year. He added: ‘The retail industry is going through a period of seismic change. We would welcome a fundamental review of the business rates regime to create a level playing field between physical stores and online retailers.’
Other businesses demanding a change include Tesco, Waterstones, Poundland, Wetherspoon and Marks & Spencer.
John Mann, a Labour MP on the Treasury committee, said: ‘The current system of business rates is totally inadequate and penalises small businesses unfairly in my constituency.
‘Giant internet businesses like Amazon can make billions of pounds of profit while barely paying business rates, whereas small bricks and mortar business have to pay high rates while making dramatically lower profits. Local areas need to have more discretion over business rates or a new system needs to be found.’
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