Business rates outpace council tax and fuel duty rises

Estimates by the Office of Budget Responsibility (OBR) have shown that the amount generated through business rates will surpass tax and fuel duty in the 2015/2016 year. 

Business rates is a controversial tax levied on property, and has received widespread criticism over the last few years for its hindering effect on SMEs and the struggling retail sector.  Under current plans, however, business rates will continue to rise, amounting to an estimated increase of 41% over the decade.  This is according to the OBR’s latest figures, which show that the rise will take place between 2008 and 2018 and mean an added £9.4bn of tax generated revenue for the Treasury.

Paul Turner-Mitchell, a business rates expert who compiled the figures, said the increase was “disproportionate” compared to other taxes.

According to a new analysis, business rates are growing at almost the same level as council tax and fuel duty combined.

In response, retailers are calling for Chancellor George Osborne to extend a period of relief measures put in place in last year’s Autumn Statement.  These include capping the annual inflation-linked increase in rates at 2%, offering a potential discount of £1,000 for small businesses.

Meanwhile, manufacturers have warned the Chancellor that business rates risk “seriously undermining” the attractiveness of the UK for investment and could damage the economy.

In a letter they wrote: “Business rates is one of the very few taxes which are non-cyclical and fixed at a level irrespective of economic or market conditions.

“Fixed costs are given much greater prominence over taxes when making investment decisions and therefore huge comparative distortions (with the rest of Europe) are seriously undermining the UK’s case as a destination for investment.”

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