There are growing fears the companies in Scotland could be hit with a business rates rise next year.
Finance secretary Kate Forbes painted bleak picture of the government’s finances last week as she outlined plans to cut public services to offset a £3.5billion funding black hole.
Yesterday, the Sunday Times revealed that the small print of Forbes’s medium-term financial strategy (MTFS) suggested that employers are being primed for a sharp rise in business rates next year to help make up the shortfall.
The MTFS notes that business rates form “an important component of the overall funding available to the Scottish Government”, and that “based on current expectations about the tax base, an increase in the poundage would be required”.
The headline rate paid by businesses operating from commercial premises has risen 20% in the past decade, to 49.8p in the pound, and is currently at its highest level in 23 years.
Business groups have hit out at plans.
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “We need an ambitious, in-depth independent review of the non-domestic rates system to succeed the Barclay Review.
“Unconstrained this time by the principles of revenue neutrality, it should seek to define how the system should adapt to reflect changing property needs and usage and consider incentives for new businesses to set up and grow in the heart of our towns and cities. A new system must also recognise and account for the impact of technology on retail and the changing use of our city centre buildings.
“However, instead of reform, it looks increasingly likely that the poundage rate might actually go up, adding to up-front business costs at a time where many companies are still reeling from the impact of the pandemic, with footfall and custom limited in many cases and not yet at pre-2020 levels.
“Many companies have either had to access loan funding or exhaust reserves to keep trading, so bigger rates bills may mark the end of the road for many.”
David Lonsdale, director of the Scottish Retail Consortium, said: “The business rate is already at its highest level since the advent of devolution. A further hike next spring is unnerving.”
Retailers account for close to a quarter of all business rates in Scotland. Figures released last week revealed Scotland’s retailers are struggling to recover from Covid, with shopper footfall growth the worst in the UK.
Lonsdale said: “The only fixed point in a world of flux for retail seems to be rising supply-chain and government-imposed costs. We need a shift in mindset on business rates, with a move away from trying to squeeze tax revenues from commercial properties to one that encourages investment.”
In her Resource Spending Review, Forbes also demanded local authorities increase revenues by introducing the controversial workplace parking levy and by imposing taxes on tourists through the visitor levy.
She also called on public bodies that charge for services to identify ways to recover more of their costs.
CBI Scotland director Tracy Black said the Scottish government needed to do more to deliver the “investment-led growth” required to support its “ambitious public spending”.
She said: “Business has also long been concerned about the impact of ad hoc levies like the ‘tourist tax’ and workplace parking levy, which could hurt investment and competitiveness, as well as having unintended consequences for a wide range of firms and workers.”
A government spokesman said: “It is the Scottish Government’s annual budgets that will decide fiscal policy.”
He added: “The Scottish government will work closely with Cosla over the coming months to agree a new deal for local government in Scotland, including the development of a fiscal framework to deliver greater flexibility over financial arrangements for local government, with improved accountability for the delivery of national outcomes.”
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