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UK Business Faces GBP1.5 Bn Local Government Tax Grab

by Jason Gorringe,, London

14 August 2007

A proposal by a UK parliamentary committee that could see businesses pay up to 10% on top of their local business rates would be "manna from heaven" for local authorities seeking to get their hands on extra revenues, the British Chamber of Commerce has warned.

Responding to the Department of Communities and Local Government Select Committee Report on a Supplementary Business Rate (SBR), Natalie Evans, Head of Policy at the BCC said: “It is completely unacceptable that businesses could have to pay up to an extra 10 per cent on their rates without a vote."

"If every council in England made use of SBR’s then businesses could be paying an extra GBP1.5 billion a year, a staggering amount," she remarked.

Evans observed that the review of local government by Sir Michael Lyons recommended that the cap on any SBR should be set at 4% but the Select Committee is proposing no national cap - "a recommendation that will be manna from heaven for local council officials looking to get their hands on extra revenues."

“If an SBR is going to be introduced then firms must have a vote on the additional tax being levied. It is also critical that it is transport schemes that any additional revenue raised is spent on. Business is being held back by crumbling transport infrastructure in England and if they are going to face higher taxes the money must be spent on schemes that will actually help them," Evans stated.

“It is also crucial that arguments for SBR’s are not taken in isolation of other proposed tax raising schemes. There are already 42 Business Improvement Districts which levy an extra tax on business, Section 106 agreements, the proposed Planning Gain Supplement and other possible schemes such as Nottingham Council’s Workplace Parking Levy and road pricing proposals in cities across England. The cumulative impact if all of these schemes were introduced could cripple business competitiveness," she warned.

British industry has previously warned that efforts to improve the UK's tax competitiveness may be undermined at local level if certain recommendations of the Lyons Review of Local Government are put in place.

Speaking at a conference to discuss the implications of the Lyons Review earlier in the year, Richard Lambert, Director-General of the Confederation of British Industry (CBI) described the report as a "curate's egg".

"It's great in parts," he observed. "Business agrees with its overall message that local government needs to 'shape' communities where people will want to work and live. Where he recommends that companies should pay over and above the business rate to fund new infrastructure projects, however, Lyons runs the risk of ruining the good bits."

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