Kevin Hollinrake calls for the abolition of business rates
Conservative MP Kevin Hollinrake reiterated his call for the abolition of corporate rates before the budget for next month on March 3rd.
The company rates are “anachronistic” and should instead be replaced by a 3 percent increase in VAT, which all companies would pay.
This 3 percent increase in VAT to 23 percent would affect all businesses, not just retailers, and the £ 30 billion annually raised would end the abolition of business rates.
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Currently, the Treasury Department appears to be turning to a 2 percent online sales tax, which will be announced in the fall statement.
However, Mr. Hollinrake points out that most companies now have a mixed model for physical and online sales and calculating digital sales would be complex.
Mr Hollinrake tabled his bill in the House of Commons calling for business rates to be abolished last month. So far there has been no response from the Treasury. However, his conversations with retailers such as Tesco, B & Q and Screwfix have been positive, as has the reaction from ACS, which represents convenience stores.
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Mr. Hollinrake described the business tariffs as “designed for a bygone era long ago when business went hand in hand with the high street premises. Covid has quickly made this time seem even further away. “
The abolition of business rates would at the same time “completely dispense with the convoluted business rate system, including revaluations, checks, appeals, appeals, annual invoices and collections”.
It would also “free” the thousands of people who work at the Valuation Office Agency who are involved in the tortuous system of revaluations, checks, challenges, appeals, and collections.
Online sales now account for 33 percent of all retail sales, compared to 20 percent a year ago.
Critics argue that increasing VAT to 23 percent would hit the poor the hardest and would only pass on what was paid in corporate rates to the consumer. However, Hollinrake argues that customers are already paying for business tariffs indirectly because the operating costs are hidden in the prices paid for things.
In fact, Hollinrake believes prices would stay the same as retailers would stop paying business rates despite the 3 percent VAT hike.
Mr Hollinrake said, “Consumers all pay taxes, that’s the reality. In a competitive marketplace, prices are lowered by competition on capital costs and operating costs. It’s built into what a company can do to stay afloat. Online sales tax would ultimately still be paid by the consumer – there is no difference. You are just exchanging one tax for another. “
Hollinrake points out that when Amazon introduced a 2 percent digital sales tax last August, it simply passed the cost on to small businesses selling through its platform.
Politically, a 3 percent increase in VAT may be a difficult argument, as the government has expressly not promised an increase in VAT rates in its manifesto.
Mr Hollinrake isn’t the only high profile person calling for corporate rate reform.
Last month, Theo Paphitis, television star of Dragon’s Den and owner of Ryman stationery, said he prayed that Rishi Sunak would hear about corporate rate reform, which he called “the most unfair tax in the fifth century.”
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