U.K. Firms Urge Sunak to Overhaul ‘Unproductive’ Business Rates
(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak faces growing pressure to overhaul U.K. business rates, after representatives of more than a quarter of a million employers said they drag on investment and set back government goals to boost productivity and cut greenhouse gas emissions.
Reducing the burden on business could unleash a wave of investment geared toward the government’s aim to achieve “net zero” carbon emissions by 2050, and to “level up” by equalizing opportunities across the country, business lobby groups led by the Confederation of British Industry said Thursday.
U.K. businesses have long argued that the rates -- which are based on property values and tax bricks-and-mortar outlets -- favor companies trading on the Internet and those with large out-of-town depots over those with physical outlets in town centers, contributing to the decline of high streets.
Prime Minister Boris Johnson’s government is currently reviewing the rates system, with an outcome due in the fall, possibly as soon as Oct. 27, when Sunak delivers his budget statement.
The opposition Labour Party has already pledged to scrap business rates and review hundreds of tax breaks if it wins power. Finance spokeswoman Rachel Reeves said Thursday the current system “is no longer fit for purpose.”
The business groups said the current system is uncompetitive, with property taxes 50% higher than the G-7 average as a proportion of economic output. They also said it is unproductive, putting firms off investing in energy efficiency because they face higher rates bills as a result.
“As these investments take several years to yield a return, the immediate increase in rates often makes the investments unviable,” they said. “With the current business rates system acting as a tax on investment, action is needed to rebuild the U.K.’s international competitiveness.”
They called for an immediate exemption from business rates for investments in emissions-reducing machinery and factory investment, and in technologies such as heat pumps and solar panels.
The statement was issued by the CBI and 41 trade associations including the British Retail Consortium, the Society of Motor Manufacturers and Traders and UKHospitality. Between them, they employ 9 million people in the U.K.
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