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Economy

Business groups unite against tax plans

Monday, 15 October 2007

Three of the UK's leading business organisations have joined forces to call on the Government to rethink its Supplementary Business Rate plans.

At an event in the House of Commons, sponsored by Andy Love MP, the Federation of Small Businesses (FSB), the British Chambers of Commerce (BCC) and the Institute of Directors (IoD) – representing over 350,000 businesses – set out their opposition to the scheme.

However, suggestions on how to improve the scheme should the Government’s White Paper on the issue, launched by the Chancellor in the Pre-Budget Report, make it onto the statute book were also made. These included:

No Supplementary Business Rate should be introduced without a vote in favour from a majority of businesses in the affected area. A vote should be called before infrastructure projects are agreed, regardless of the proportion of the money being contributed by businesses. This vote could use the same mechanism as the voting system for Business Improvement Districts (BIDs) that ensures the voice of small businesses is not drowned out by larger companies.
Exemptions for businesses not eligible for Supplementary Business Rates should be automatic and should not require any application process, to cut down on red tape.
Where a Supplementary Business Rate is proposed, the rate revenue should be ring-fenced for specific infrastructure projects.
Supplementary Business Rates should operate for fixed terms, usually the construction life of infrastructure projects, similar to BIDs.
The proposed rateable value threshold of £50,000 below which ratepayers would not pay the Supplementary Business Rate must not be reduced.

The FSB said it is firmly opposed to Supplementary Business Rate. However, if the Government is determined to go ahead then it needs to listen to businesses in order to choose the least damaging option.

"Otherwise councils will use it to raise revenue more easily than if they put up council tax, hitting local economies and employers. Without a vote for small businesses in all cases where a Supplementary Business Rate is planned this will simply be another tax on the wealth-creators of our local communities," Roger Culcheth, FSB Local Government Chairman, said.

David Frost, Director General of the British Chambers of Commerce said: “Business is opposed to the introduction of a Supplementary Business Rate. UK companies are facing enormous global competitive pressures and any additional tax will further harm their ability to compete."

If, however, local authorities are given the flexibility to introduce a Supplementary Business Rate, the BCC said it is essential that businesses are given a vote. If a Supplementary Business Rate is to provide funds for an infrastructure project that business believes is necessary, and if there is a clear project plan with ring-fenced funds tied to the scheme with the money raised being wholly additional, then the business community may well vote yes in a ballot, the British Chambers believe.

The Institute of Directors, said that the proposed introduction of an SBR will rock UK businesses, not least because - it claims - such a move increases costs without any correlation to a business’s profits or their ability to pay.

"Town Halls will be more than happy to avoid a ‘ballot box’ revolt over council tax increases," according to Miles Templeman, Director General of the IOD. "The IoD recognises the important financial contribution that business can make to defined projects with agreed benefits to enterprise, such as Crossrail. However higher rates without a mandatory vote will only deepen the disconnect between local politics and the business community."

Last week, CBI Director-General Richard Lambert sent an open letter to the Chancellor, setting out the business group's deep concerns over changes to the Capital Gains Tax regime announced in the Pre-Budget Report. The letter said the move "undermines the 10 year effort by this government to promote enterprise and risk-taking within the UK".

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