LIZ CAMERON
Imagine a corporate high-flyer, made redundant in 2014, who seeks a lifestyle change and retrains as an acupuncturist. Most would consider it unfair if she were still paying additional rate income tax in 2017 because her earnings previously exceeded £150,000.
Of course, personal taxes and non-domestic rates are not directly comparable. Nevertheless, the principle is the same: a fair taxation system reflects the
reality of today’s economic circumstances, not those of yesteryear.
The Barclay Review of Business Rates in Scotland was tasked with enshrining this principle in a new business rates blueprint for Scotland. Having now studied its report in detail, Scottish Chamber of Commerce’s Business Rates Advisory Group regrettably concludes it has not done so.
For all its good intentions, the Review fails to achieve its overarching brief “to better support business growth, long term investment and reflect changing marketplaces”.
A lot of diligent research, wide consultation and careful thought by Mr Barclay’s group is in evidence, and there are positive steps to applaud, most obviously the reduction of the revaluation cycle from five years (or more)
to three, and shrinking the period from revaluation to implementation from two years
to one.
Also encouraging are its pro-growth recommendations, such as a review of plant and machinery valuations to allow businesses to recoup capital investment, and a year-long rates delay to allow builders or tenants of new property a “grace period “ before paying up.
The SCC network also likes the proposed cancellation of the misleadingly-named Large Business Supplement, which left 5,000 Scottish medium-large businesses paying up to £12 million more in rates each year than counterparts in England. Uncompetitive measures like that made nonsense of the Scottish Government’s aim of making Scotland “the best place to do business anywhere in the UK.”
Why then do we consider Barclay a missed opportunity? Because the group’s hands were tied by the Government’s condition that rates changes must be “revenue neutral”. A scheme that truly reflected “today’s economic circumstances” could respond to the economic equivalent of natural disasters, for example the collapse in north east property values caused by the oil and gas downturn.
A system predicated on maintaining the bottom line at all costs will punish property owners and tenants in times of distress or tentative recovery.
Better, in SCC’s view, for the Government to sustain temporary drops in rates revenue in tough times than to see the rate payers of the future go under.
“Revenue neutrality” turns out to have been a killer condition. It stopped Barclay from achieving the bold UK-leading rates regime that Scottish business needs.
Liz Cameron is chief executive of Scottish Chambers of Commerce.
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