Using CPI rather than RPI could save firms £1.5bn

Creating a simple, fair and competitive system must be the chief aim of the Government's business rate review according to the CBI, the UK's leading business group.

The CBI says business rates are limiting investment and hampering competitiveness, as in Germany property taxes are one fifth and in France one third of the level paid by businesses in the UK.

Future changes must be geared towards boosting growth, investment and jobs, the CBI says in its fully-costed reform submission to the Government's business rates review consultation, which closes today (12 June).

Among the CBI's recommendations are measures to remove the smallest properties from business rates, implement more frequent revaluations and use the Consumer Price Index as opposed to the Retail Price Index.

Katja Hall, CBI Deputy Director-General, said:

"The current business rates system harms businesses by relying on a decades-old model that no longer reflects economic conditions. That's made life tough for retailers in particular.

"These reforms are long overdue so it's good that the Government is following through on its commitment to look closely at how it can help alleviate the most onerous aspects of business rates.

"We want a simpler, fairer and more competitive system by having more frequent valuations, removing the smallest properties from paying rates, and using the Consumer Price Index so rates don't outpace inflation.

"However we must avoid devolving rate-setting powers as this will create an uneven playing field, distort growth across the UK and add extra costs for companies. Any further moves towards business rates retention must be backed up by clear evidence that it contributes to growth. As far as businesses are concerned the case is yet to be proven."

The CBI is calling for:

Skyscrapers (PD)More frequent property valuations – this will make business rates fairer and more responsive to economic conditions, such as rent changes, improving fairness. Currently, businesses are paying rates agreed in April 2008 before the market collapsed. The employers' group recommends a three year evaluation period.

Using the Consumer Price Index, as opposed to the Retail Price Index, will ensure the burden of business rates does not outpace the official measure of inflation. This reform could benefit business rate payers to the tune of £1.5bn by 2020/21.

Removing the properties with a rateable value of less than £12,000 from paying rates will reduce the burden for SMEs as well as providing significant efficiency savings, which can be reinvested to further improve the system.

And by the end of this Parliament, the Government should implement a clear road map for longer-term reforms such as online billing and administration, which will create savings for the Government, while saving businesses time and money.

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