Business tax is a threat to Scottish jobs, claim retail giants

Boots, Marks & Spencer and John Lewis are among more than 40 firms and business organisations that have called on the Scottish Government to reform non-domestic business rates or risk a staff cull.

In an open letter published in a national newspaper, firms and business representative organisations called on all of Scotland’s political parties to commit to the fundamental reform of business rates in their manifestos for the 2016 Holyrood election.

The signatories of the letter represent a wide cross section of Scottish industry including representatives of manufacturing, engineering, tourism and leisure, publishers, printers, commercial property as well as the prominent Scottish and UK retailers.

They say business rates, which raise £2.8 billion and have risen 42 per cent since 2007, now place an “unsustainable burden” on them and compares to only around a 7 per cent revenue increase over the same period in council tax, the equivalent property-based tax.

In the open letter to The Herald newspaper, the rates are described as “a tax on jobs and growth” that “acts as a drag on the Scottish economy”.

The collective call comes as firms across Scotland cite the disproportionate and unsustainable burden of the tax as a key factor in holding back investment, job creation and undermining the profitability of their businesses.

The campaighn for change has been co-ordinated by the Scottish Retail Consortium which said current business rates “fail to flex with the wider economic conditions and take no account of the profitability of a business”. This, the industry body said, “has meant that despite challenging economic conditions over recent years the tax burden on firms has continued to climb”.

Scotland’s retailers have previously set out a range of short term reforms which they believe are urgently required to arrest the number of store closures and stimulate town centres, investment and jobs.

Commenting on today’s publication of the letter, SRC Director David Lonsdale said: “This is a powerful statement from a formidable and broad cross section of business and industry in Scotland that the business rates system is out of date, no longer fit for purpose and in serious need of fundamental reform.

“Retailers view the current system as a tax on jobs and growth, undermining investment in new or refurbished shop premises. There is no greater pressing issue for the industry than the prohibitive burden of business rates.”

The SRC’s proposed:

Mr Lonsdale added: “In the retail industry alone, 3,500 jobs have been lost over the past year with the risk of losing more unless this tax on jobs and investment isreformed to support business growth and employment.

“As the parties finalise their manifestos for the 2016 election now is the time to commit to take action to support businesses and unleash investment in Scotland.”

Warning of job losses, he added: “This is not just a problem for firms.

“Business failures have a profound and damaging impact on communities through job losses, inward investment and a loss in government revenue through the forfeit of other taxes.”

But countering the claims, Finance Secretary John Swinney, who last month handed councils powers to reduce business rates in their areas, a move welcomed by business organisations, defended Scotland’s business tax regime as “already the most competitive in the UK”.

More than 250,000 Scots work in the retail sector, close to one in eight of the workforce.

Business rates are based on the rateable value of a company’s premises, multiplied by a “poundage” which is set annually by the Scottish Government.

Larger businesses occupying property with a rateable value above £35,000 pay a supplement, which subsidises a rates relief scheme affecting almost 100,000 smaller premises.

The poundage this year is 48p in the £1 with a 1.3p supplement for larger businesses.

For much of the previous decade, the Scottish poundage rate was significantly higher than south of the Border but was brought into line with the English level by Mr Swinney in 2007.