As reported by the WSCT, councils are to keep Business Rates (BR).
That may seem generous, but Government has a habit of taking away with one hand what it gives with another - and it will be no different this time.
Of course the change will make councils more dependent on the health of the economy for their income, which already relies to some extent on the New Homes Bonus. Thus Government is handing down financial (and political) risk to them.
Councils could simply continue to increase BR by RPI, but that could be self-defeating. Indeed, a report by PwC warned that the pledge to cut corporation tax to 20pc is already being offset by a surge in BR and employers’ NI contributions, not to mention the Living Wage, ever-increasing red tape and an increasingly bureaucratic BR Appeals process.
So small and medium-sized enterprises (SMEs) are not having it easy, noting that there are around 7,000 of them in Horsham District, each employing up to 250 employees, compared with around 25,000,000 employees across the UK.
But they are also in competition with big companies which can avoid big taxes - because the EU founding Treaty entitles firms to move income to the country where they prefer to have their tax base.
Since SMEs drive innovation, improving productivity and exports, it is surely time to level up the playing field by i) optimising BR income so that it is related to (say) business volume, rather than to RPI, ii) reducing their regulatory burden and iii) by closing loopholes for massive tax avoidance, by their competitors.
The OECD is trying to resolve the latter issue, but is likely to come up against lobbying from vested interests. The UK introduced a Direct Profits (Google) Tax, but expects to recover less than two per cent of the potential identified. Without Treaty Change, the UK probably can’t do much more for now.
So in the short term we must hope that, rather than using SMEs as a cash cow, councils will redesign BR to optimise receipts - rather than continuing with RPI increments. Let’s help SMEs to win.
Melrose Place, Storrington
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