Retail bosses are preparing to urge the Treasury to increase corporation tax in order to cut business rates by £6bn in a bid to save the UK’s struggling high streets.
The recommendation to the government will be made in a report by a sub-committee of the Retail Sector Council, due to be shared in the next few weeks, Sky News reported.
The Retail Sector Council is co-chaired by minister for small businesses Kelly Tolhurst and former Co-op chief executive Richard Pennycook, who is also the chair of department store chain Fenwicks.
Among the council’s members are Asos chief executive Nick Beighton, former John Lewis Partnership chairman Sir Charlie Mayfield and Elizabeth Fagan, the non-executive chairman of Boots.
The council was set up in 2018 to help address the decline of the UK high street and increase the productivity of the retail sector.
The report is expected to include several recommendations, including the proposal to raise corporation tax by two per cent to raise around £6bn a year by 2022/23.
According to Sky News, the extra revenue would be used to reduce the business rate multiplier to around 40p in the pound. Other proposals cover VAT reform and tax and property cost transparency.
Robert Hayton, head of UK business rates at real estate adviser Altus Group, said the move to increase corporate tax and reduce business rates would be an “eminently reasonable fiscally neutral solution”.
“As a country we are far too reliant upon property to derive tax revenues. Almost 1 in every 6 properties with a rates bill received a summons to appear before a Magistrate during the previous financial year alone having fallen into arrears,” he aid.
“Reducing business rates, which would need to be for all properties, across all sectors of the economy, funded by an increase in corporation tax, would transfer the tax burden to those more profitable businesses, an eminently reasonable fiscally neutral solution.”
However, some analysts said increasing taxes would damage growth and investment across the UK.
“There were no economists on the Retail Sector Council committee—and it shows,” Daniel Pryor, head of programmes at the Adam Smith Institute said.
“Business rate cuts are a sop to landlords and do nothing to adapt to the fact that fewer of us are working, living or traveling to the high street. Landlords have reacted to previous rate cuts by increasing rents and within a few years any savings for businesses evaporated.
“Funding this misguided policy will subsidise landlords while punishing companies that have been the backbone of the British jobs miracle. Hiking taxes now would hurt jobs, growth and investment across the country: all for very little benefit. “
Retailers have repeatedly raised business rates as a major concern, saying they are one of the major challenges facing the high street.
Following the Conservative Party’s victory in the General Election last month, the British Retail Consortium (BRC) renewed its call for a review of business rates.
Helen Dickinson, BRC chief executive and Retail Sector Council member said: “The prime minister must now fulfil his manifesto pledge and urgently begin a fundamental review into the broken business rates system to relieve the burden on retail businesses and create a system fit for the 21st century.”