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Threat of more high street closures

Holyrood warned that high rates are turning away investors

David LonsdaleScottish retailers today step up their campaign to force the Holyrood government to follow Westminster and instigate a review of business rates, or else see the country’s high streets suffer further devastating closures.

In a sign that lobbyists are becoming increasingly frustrated by the Scottish government’s position, the Scottish Retail Consortium has issued its THIRD recent warning of the impact of the tax on property.

It comes just four days before business rates are due to rise by 2%. Although the rise is capped below the 2.3% rate of inflation last September which acts as a benchmark for setting rates, the SRC says this year’s rise comes at a time when inflation has slumped to zero.

The Scottish Government has admitted it is worth an additional £150 million in tax revenues, taking the total rates raised by the government to £2.8 billion.

The SRC says the tax rise will hit retailers particularly hard as they contribute around one-quarter of this total.

Rates revenue from retailers has risen by 30% since 2009 while closures have left high streets with 1,800 fewer shops. The SRC says that every 1% rise in the shop vacancy rate equates to a loss of around 2,550 retail jobs in Scotland.

David Lonsdale, director of the SRC, said in a report published last month here that the current system is “not fit for purpose”.

“It acts as a disincentive to invest and, as this recent tax hike demonstrates, it fails to flex with economic circumstances and only ever rises.  This has manifestly been to the disadvantage of businesses and town centres right across Scotland,” he says.

“The UK Government has launched a fundamental review of business rates in England and we would encourage the Scottish Government to do the same.  After all, the Scottish Government’s recently announced review of the Council Tax proves that reform of local government finance is not impossible.

“A fundamental reform of business rates is urgently required in order that we can have a system that better supports economic growth and job creation.”

Daily Business revealed last month that the Commission on Local Tax Reform will not include a review of business rates.

The SRC says the six key arguments for reform are:

1) The overall burden of business rates is too onerous;

2) It is out of line with other taxes and doesn’t reflect wider economic conditions;

3) It creates disincentives to invest;

4) It is not keeping pace with wider structural changes in the economy;

5) The link to public services is broken and there is little transparency and reduced confidence in the system;

6) The current panoply of reliefs is inefficient and unclear.

A range of businesses and representative groups are supporting the call for reform including the Scottish Chambers of Commerce, RICS, Scottish Property Federation, Association of Town and City Management Scotland, Scotch Whisky Association, Publishing Scotland, Intu Properties, National Federation of Retail News, Scottish Engineering and the Scottish Grocers’ Federation.

>> Daily Business Comment: Inflation down, but rates up

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