Leading regional shopping centre owner and operator intu claims that the excessive level of Business Rates deters retailers from expanding and curtails investment by owners of retail property.
In response to the Chancellor’s Business Rates review, intu says the multiplier applied to a property’s rateable value is now at an extreme level in terms of its economic impact on the UK retail sector.
Corporation Tax has been steadily reduced from 34 per cent in 1990 to an internationally competitive 20 per cent today. In contrast the Business Rates multiplier has risen from 35 per cent to 49 per cent over the same period.
Furthermore, unlike Corporation Tax, the structure of Business Rates fails to respond to changes in economic conditions with the result that levels continue to rise throughout economic downturns.
Because intu also owns regional shopping centres in Spain, the company is well placed to compare property taxes in each country. Looking at taxes on property as a percentage of GDP, the figure is over 4 per cent in the UK compared with around 2 per cent in Spain. The OECD average is even lower at 1.8 per cent.
David Fischel, Chief Executive of intu, said: “We are not opposed to the principle of a property tax but the excessive level is making the UK less competitive and less attractive for retail investment.
“It means that when considering expansion plans, international retailers are more likely to open overseas than expand throughout the UK, meaning that the regions outside of London are particularly hard hit by the high levels of Business Rates.”
In 2014, intu and its tenants paid £297 million in Business Rates, a figure equivalent to around one per cent of the UK’s total Business Rates revenue. This is a significant cost for retailers with a substantial impact on jobs, intu claims.
Over 115,000 people are employed within intu’s UK shopping centres, equivalent to four per cent of all retail sector jobs nationally. Outside London this figure rises, with around 7.5 per cent of the local workforce employed within Gateshead’s intu Metrocentre, for example.
intu makes a number of recommendations to ease the burden of Business Rates on the retail sector, which currently pays a disproportionate 23 per cent share of the total. These include more frequent revaluations of rateable values, the improved use of technology, and a move away from the link to RPI.
The company agrees with recommendations from other parties regarding empty property rates and transitional relief. intu also warns that the Government’s plans to devolve additional powers to the regions, which it supports, will be jeopardised without thorough reform of the Business Rates system.