BUSINESS RATES could be self-defeating unless there is a significant overhaul of the way the charge is levied, according to former Sainsbury’s chief executive Justin King.
The evolution of business and retail towards online trade has seen the levy become a competitive issue for the high street, King maintains. Business rates are administered locally on all non-domestic properties and capped at 2% of turnover.
Speaking at the Public Accounts Committee’s conference on the impact of globalisation on taxation, King noted the problem for the government that as the high street suffers disproportionately from having more properties taxed than their online counterparts, the tax base for the levy shrinks.
“With both the international and virtual nature of so much business today, it is clear that a business tax system designed last century, when business was very different, needs a significant overhaul. Tax should not be part of the competitive landscape and this is why it is increasingly becoming an issue for consumers as well as governments,” he said in his keynote speech.
Public Accounts Committee chairwoman Margaret Hodge echoed the need for change.
“We are both bewildered and shocked at the sheer lengths that some companies – like Google, Starbucks and Amazon – will go to to get out of paying their fair share,” said Hodge. “I am therefore in no doubt that the present settlement is wrong and must be reformed.”
However, on tax reliefs, Justin King denied their use amounted to tax avoidance: “They are not loopholes. They are legitimate tax systems put in place by legitimate governments legitimately elected.
“It is wrong to lay that at the door of companies operating their business in a structure… constructed by government. The first thing you have got to do is hold governments to account for putting those structures in place; that we have seen in Ireland,” King said.