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Business rates ‘not fit for purpose’ as retail goes digital: MP

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The business rates system is no longer fit for purchase in a multichannel world where retail sales are moving online.

That’s the message of Parliament’s Business, Innovation and Skills Committee, as it today publishes a report on the business rates system as it applies to retail businesses.

The business rates system has been much criticised in recent months as a major drag on high street shops in comparison with their online rivals, who are free of specific retail sales taxes. The BIS committee’s report came in reponse to those criticisms.

Adrian Bailey, MP, who chairs the BIS committee, said the business rates system was the “single biggest threat to the survival of retail businesses on the high street.”

He said: “Since the system was created, the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.”

Today, the committee calls for a review of retail taxes that will look at whether they should be based on sales rather than the rateable value of a property, and at whether a new system of business taxation is needed for retail. In the meantime it suggests a six month amnesty on business rates for those occupying empty properties, and that the Government look at whether increases in business rates should be linked to CPI or RPI measures of inflation. It suggests the figure be capped at 2% a year. Currently the rates rise in tandem with a monthly snapshot of RPI.

“The Government’s consultation on the administration of business rates at least acknowledges that change is needed,” said Bailey. “But this is a time for wholesale review and fundamental reform, not for tinkering around the edges. Business rates are not fit for purpose and minor administrative changes will not alter that.”

Bailey also called for more information on how money had been spent by Portas Pilot towns, and for improved training for sales staff as digital requires more of them.

“The skills needed by those working in the retail sector are changing rapidly as shoppers operate in an increasingly digital world and shopping becomes an increasingly multi-channel experience,” said Bailey. “The Government must outline the action it will take to tackle any skills shortages and the sector itself must be more ambitious in the level of training it offers to its staff.”

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