Scotland’s business rates system must reflect economic reality and promote investment

The business rates system in Scotland should aim to reflect economic reality and maximise investment, according to CBI Scotland’s response to the Independent Review of Scottish Business Rates. CBI

Given recent weaker growth in Scotland and what is likely to be a period of economic adjustment following the vote to leave the EU, the CBI is calling on the Scottish Government to use business rates reform as a tool to propel investment and employment in Scotland, enabling businesses to remain competitive. The recommendations involve a modest cost relative to potential benefits from a more competitive commercial property system.

CBI Scotland has warned that failure to take action now ultimately risks diminishing tax revenues as a result of firms changing business models to reduce their commercial property footprint, or moving their operations to lower tax locations elsewhere in the UK or Europe.

The CBI’s submission recommends:

  • Continuing to align the Scottish business rates multiplier with other parts of the UK to avoid a deterioration in Scottish business competitiveness
  • Indexing business rates by CPI from 2017/18 to avoid unsustainable increases in the business rates multiplier for property based businesses
  • Exempting new investments in plant and machinery and environmental efficiency from business rates to encourage productive investment
  • Valuing Scottish business properties every three years to make business rates more responsive to economic conditions and reduce tax barriers to redevelopment
  • Modernising billing and collection of business rates to reduce administrative and compliance costs.

Hugh Aitken, CBI Scotland Director, said:

“Businesses are vital to driving economic growth and raising living standards in Scotland through investment and job creation. Ensuring a competitive tax environment will encourage companies of all sizes to grow and prosper.

Non-domestic rates on commercial property are one of many ways companies rightly contribute to the public purse and to local services, but the system must reflect current economic realities facing the country and businesses.

Scotland has been going through a period of slower growth and is facing an economic adjustment, following the vote to leave the EU, so more than ever business rates must promote and safeguard investment in the country.

Scotland is competing on the global stage and if the Scottish Government fails to act now it risks losing tax revenue in the long-term. Companies may choose to adapt their business models to reduce their commercial property footprint here, or simply move their operations to more competitive locations elsewhere.”

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