SCOTLAND’S rates system still needs a radical overhaul after this year’s botched revaluation exposed long-standing structural problems, business leaders said last night.
Industry bodies said the current review into business rates led by former RBS chair Ken Barclay should lead to a fundamental rethink of how commercial property is taxed.
Collected and spent by Scotland’s 32 councils, business rates are based on the rental, or rateable, value of a property multiplied by an annual poundage rate set by central government, which in 2017-18 is 46.6p.
Read more: Derek Mackay bows to rates hike fears with £45m package
In 2017-18, non-domestic rates will raise around £2.6bn for council services.
But the system is complicated by various discounts, or reliefs, for small businesses, charities and others, and a supplement on large properties.
Licensed premises are also rated on turnover, but other firms on size.
The new reliefs for hotels, bars, pubs and restaurants nationally, and office space in Aberdeen and Aberdeenshire, plus some renewable energy schemes, add yet more complexity.
Because they are unpopular, governments tend to defer revaluations - the last was in 2010 - leading to greater shocks when they arrive.
SNP-supporter Donald MacLeod, who owns The Garage nightclub in Glasgow, thanked The Herald for its campaign on the problems, but said there remained more issues yet to fix.
Read more: Derek Mackay bows to rates hike fears with £45m package
He said: “The campaign made a huge difference. It’s really done the business for business.
“But the rates system is a dog’s breakfast. My worry is the Barclay review will be wishy washy.
“It’s a radical shake-up that’s needed. This revaluation has highlighted that.
“Now those concerns have been identified, it would be a wasted opportunity, and one they would be blasted for, if the Barclay review was just full of platitudes.
“We need constructive, meaningful change that we can all accept and work with.”
Ewan MacDonald-Russell, of the Scottish Retail Consortium, which represents many of the large stores subject to the rates supplement said the changes were “another sticking plaster on the suppurating wound of the unreformed business rates system”.
Read more: Derek Mackay bows to rates hike fears with £45m package
He said: “The rates system is no longer fit for purpose. It regularly fails to reflect economic or trading conditions, with rates bills way too high, especially for the 21,000 commercial premises in Scotland continuing to pay a higher tax rate than competitors or counterparts in England.
“Profound structural changes are changing the Scottish economy. In retail almost a quarter of non-food retail sales are done online, and over the past seven years the number of shops has fallen by 1,700 in Scotland. These changes are likely to accelerate, calling into question the very wisdom and financial sustainability of the tax.”
Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said the new measures were welcome but didn’t “get to the root of the problem” with the “outdated” system.
She said: “We have proposed a full expert review of the methodology of valuations in the hospitality, motor trade and energy sectors, with a view to ensuring that every business in Scotland can be confident it is subject to a correct valuation of its premises.
“This would complement the ongoing work of the Barclay Review, which is a more general and less technical appraisal of the system.”
Colin Borland, of the Federation of Small Businesses, added: “The furore associated with this year's revaluation shows why the system is long overdue for reform. A programme of modernisation must be delivered soon after the Barclay review reports.”
Stuart Patrick, chief executive of Glasgow Chamber of Commerce said: “We still strongly urge businesses to appeal their revaluations. We look forward to more sustained change for what has become a broken tax through the work of the Barclay Review.”
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