UK Government Decides To Scrap Extra Tax On Businesses

by Mandy Robinson, Tax-news.com, London

26 April 2001

A new scheme for Business Improvement Districts (BIDs) has been announced by UK Prime Minister, Tony Blair, that will enable councils and businesses to work more closely together to improve their communities. But the really good news - for businesses that is - is that the government has decided to scrap its original idea of enforcing a blanket additional business rate to fund the initiative.

The government had intended to burden businesses with an extra 5 per cent of the current business rate but a vigorous campaign launched by businesses nationwide succeeded in persuading the government otherwise. During his speech at a conference on the quality of life in Croydon this week, Mr Blair confirmed: 'Our approach will be based on consent and on partnership. Only where a majority of businesses agree with a proposal will councils be able to raise the extra revenue required to fund it. An improvement scheme will be proposed either by councils or businesses and have to be agreed by both parties - with local businesses having a say.'

The British Chambers of Commerce (BCC) welcomed the government's decision, saying that had it gone ahead with the extra tax it would have cost UK businesses an estimated £2.75 billion over five years with an extra £1 billion per year thereafter.

Ian Fletcher, head of policy at the BCC, said in a statement: 'This is a great example of the Government listening to the voice of the business community. The supplementary business rate proposal was ill-conceived from the outset, increasing the tax burden on business and threatening to ruin the relationship of business and local authority. The new proposals are what Chambers of Commerce have been advocating and we will now be looking very closely at the detail to ensure that they truly benefit the business community.'

BIDs is based on a scheme in the US where local businesses and authorities jointly fund and support community projects. It has been hailed as a great success in many of the country's major cities. Small Business Minister, Patricia Hewitt, endorsed the new scheme, saying: 'BIDs give business and local authorities the means and incentives to invest in their area. This approach, building on the very successful business model in the USA, will allow businesses to see precisely what they are getting for their money and will help to harness local business leadership.'

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