WIREDGOV

The CBI is urging the fast-tracking of business rates reform in Scotland.

The CBI has warned that failure to take action in the near-term threatens to penalise many businesses unfairly, undermining their capacity to make productive investments and making Scotland’s tax landscape less competitive compared with the rest of the UK.

CBI research finds that if new investments in plant and machinery were exempted from business rates additional investment would be unlocked to add £2 billion to Scottish GDP over the next five years.

This reform would cost around £500 million over a five year period, but higher economic activity from the reform could result in additional tax revenue of £670 million - exceeding the initial cost.

Hugh Aitken, CBI Scotland Director, said:

“Companies are struggling with the increasing burden from business rates, which are hampering efforts to create jobs and growth.

“For many businesses across Scotland increases in rates are simply unsustainable which is why it is unfortunate that changes haven’t been implemented in tandem with Ken Barclay’s system-wide review this summer.

“As the CBI’s submission to the Barclay Review recommended, business rates would benefit from more regular revaluations, ensuring rates bills don't see such dramatic jumps and remain responsive to local economic conditions. 

“Moreover, the Scottish Government should consider removing productive investments in plants and machinery out of rates altogether, while also tackling the ongoing problem of Scottish businesses paying double through a large business supplement compared with those south of the border.

“If the tax system in Scotland is not competitive we risk undermining the very foundations for economic growth while reducing the revenue receipts that the government needs to invest in services and infrastructure.

“That’s why we would recommend that the Scottish Government looks closely at how it can fast-track reform in the near-term.”

Main Recommendations:

1. Continuing to align the Scottish business rates multiplier with other parts of the UK to avoid a deterioration in Scottish business competitiveness 
2. Indexing business rates by CPI to avoid unsustainable increases in the business rates multiplier for property based businesses.
3. Exempting new investments in plant and machinery and environmental efficiency from business rates to encourage productive investment. 
4. Valuing Scottish business properties every three years to make business rates more responsive to economic conditions and reduce tax barriers to redevelopment.
5. Modernising billing and collection of business rates to reduce administrative and compliance costs