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It is time for a review of the structure of business rates

AMID the continuing controversy over the tax that big firms such as Amazon and Google do, or do not, pay, it is hard not to feel sympathy for the small and medium-sized retailers on Scotland's high streets who have no choice but to pay their business rates.

Can it be fair that an internet retailer like Amazon pays no corporation tax on billions of pounds worth of sales while high street shops have no choice but to pay business rates that are still at pre-recession levels?

The men and women struggling to keep businesses going on the high street don't think so and have expressed their dismay at the news that the Scottish Government has postponed a rating re-evaluation until 2017. Some say the decision will accelerate the slow death of local shopping communities and want a re-evaluation much earlier. The Scottish Retail Consortium has also called for a freeze on businesses rates from next April.

Why retailers have taken this position is clear: they argue that as the economic downturn has persisted, business rates should have been reassessed. Landlords and local authorities, they argue, are still living in a pre-recession world where property prices kept on rising and a reassessment of rates would help retailers recover, and in turn revive the high street.

The real position is a little more complicated because even if businesses rates were frozen, or reduced, some uncomfortable truths would not change. Firstly, consumers still don't have the money they once had to go into shops and spend. Secondly, a rates freeze would not solve the bigger problem of the general drift of retail to the internet and the fact that much of the business that used to come down in the high street is now staying in the living room with a laptop.

Even so, there is a case to answer on business rates. Homeowners and tenants have benefited from a freeze in council tax yet retailers face continuing rises and there can be no question that this will be the final nudge over the edge for some struggling businesses. A freeze or re-evaluation would be no magic bullet though. Rather, a review of the structure of business rates is needed. Small business start-ups, for example, should be given the first year of operation free of rates; they could then be paid on a sliding scale as the business becomes more successful.

The planning rules that apply to the high street are also much too restrictive and in need of review. The reality is that the high street is metamorphosing so why do councils continue to insist that an empty unit on the high street must be for retail and retail only? Radical solutions involving more residential and social use should be considered to create a more varied, more vibrant high street. Clinging to a pre-recession, pre-internet world in which business rates were a money spinner for councils is not the answer, and in the long term will only make the problems on the high street even worse.

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