New research, unveiled today by the British Retail Consortium
(BRC) in its Budget submission, shows
that the retail industry is overtaxed compared to other sectors
of the economy.
Retail pays 7.4% of all business taxes (£33bn), a share 1.5 times
greater than its share of the overall economy (5% GDP). This bill
amounts to 55% of the industry's pre-tax profits, the highest
proportion, along with hospitality, of all main business sectors.
Of this total tax bill, 11% of profits is made up of business
rates, the highest of all business sectors.
The effect of this tax burden is stark, with shuttered shops and
declining high streets in every corner of the country. This was
recognised in Labour's election manifesto which stated
“The current business rates system disincentivises
investment, creates uncertainty and places an undue burden on our
high streets.” The UK has lost 6,000 shops in the last five
years: in two-thirds of these closures, business rates had a
material impact in the decision-making process. Without action,
up to 17,300 shops could close over the next decade.
More widely, it is holding back investment in pay and upskilling
for colleagues, and in the technology that will boost
productivity, support decarbonisation, and drive economic growth.
The findings come as the BRC puts forward its submission to the
Autumn Budget, which calls on the government to introduce a 20%
Retail Rates Corrector – a 20% adjustment to bills for all retail
properties. This would meet the government's manifesto commitment
to reform the business rates system and to restore Britain's
declining high streets, and would immediately unlock investment
and growth, another priority for the government.
Helen Dickinson, Chief Executive of the British
Retail Consortium, said:
“Our research conclusively proves what retailers have known for
years: the industry is paying far more than its fair share of
tax. The impact of this is clear to see on high streets across
the country, with shops shut, jobs lost and a social as well as
economic cost. The rates bill also means missed opportunities as
other investments, which would drive growth in the longer term,
don't happen.
“The Chancellor has a golden opportunity to fix this and use the
scale of the industry to help deliver some of the government's
priorities. Introducing a 20% Retail Rates Corrector would be a
decisive move that levels the playing field between different
sectors of the economy and is the best way to achieve the
government's commitment of a tax ‘fairer for bricks and
mortar businesses'. It gives an immediate return allowing
retailers to move further and faster with investments that play a
critical part in driving growth, and in restoring our high
streets right across the country.”
-ENDS-
Notes:
-
Britain loses 6,000
storefronts in five years
-
Retail, Rates and Recovery:
How business rates reform can maximise retail's role in
levelling up
-
Reforming Business Rates: The
Jeopardy of Inaction
- New BRC research
- It presents a first comprehensive cross-sectoral analysis
of taxes borne by businesses, covering £441bn of taxes paid
and £324bn of taxes collected by businesses, together 78% of
all public receipts. The remaining 22% is dominated by taxes
wholly or largely paid by households and by unincorporated
self-employed individuals on their earnings.
- It looks at the main taxes borne by business in retail
and other business sectors: Net VAT. Payroll taxes: employer
national insurance contributions (NICs) and apprenticeship
levy. Corporation tax. Business rates, net of reliefs. Other
taxes: fuel duty, vehicle excise duty (VED), customs duty,
climate change levy and the plastic packaging tax.
- The retail sector is compared against 10 comparator
sectors (see chart below). The 11 sectors account for 80% of
the £441bn of taxes borne by businesses in the UK.
- The sector-by-sector assessment of the business tax
burden provides clear evidence that retail is more heavily
burdened by tax than other sectors, and strongly supports the
ongoing focus on reforming business rates to achieve a
fairer, more growth- and jobs-friendly tax system. One that
recognises the economic and social contribution that
property-intensive sectors like retail make in terms of
growth, jobs and local community and that catalyses the
private sector investment that the Chancellor has rightly
identified as critical to the UK's long-term growth
prospects.
- It also underlines the value of considering
sector-specific options and options helping Government to
deliver wider policy priorities (for example a longer term
and more widely applied relief to follow on from the latest
temporary support for retail, hospitality and leisure), and
for those helping to deliver Government priorities elsewhere
(for example on net zero and employment) – options that are
more immediate and straightforward to deliver.
- Extract: Taxes borne by business as a % of profits:
sectoral breakdown in 2023
Source: ONS, HMRC and OBR publications (*ETR = Effective
Tax Rate)
- Following review of the research findings, BRC's Budget
Submission proposes a Retail Rates Corrector:
- Government should apply a 20% Retail Rates Corrector (a
downward adjustment of 20%) to business rates bills for
retail properties of all sizes and in all locations.
- Should commence in April 2025, without subsidy control
restrictions, and be combined with administration
improvements and relief to bring empty properties back into
use.
- Retail Rates Corrector would cost £1.8bn and would
immediately unlock economic growth. If Treasury seeks to fund
this within the rates system, it should look outside retail,
given the impact of the existing business tax burden on
retail and retailers' ability to invest.
- Alongside the Corrector, a method needs to be found to
lessen the impact for those companies who currently receive
the Retail, Hospitality and Leisure Relief Scheme, as this
has been much needed support in recent years.
-
BRC Budget Submission
– other key policy recommendations include:
- Consider restoring tax-free shopping for international
visitors, starting with an announcement to review the last
Government's costing estimates of the decision to remove the
scheme.
- Enable a significant increase in business support for
people in need by extending VAT relief on product donations
to charities for onward sale to direct donations to
individuals and households. Start by publishing the
consultation on VAT relief on everyday donations, postponed
by the election.
- Accelerate the move to a circular economy for goods by
lowering or removing VAT on reused, repaired and refurbished
goods and services.
- Ensure that fees raised by Extended Producer
Responsibility (EPR) are ringfenced for investment in
improved recycling infrastructure which will increase
recycling rates and drive the circular economy.
- Ensure that retailers have access to affordable financing
as they fund the operation of the Deposit Return Scheme (DRS)
Deposit Management Organisation (DMO) until the scheme is up
and running in October 2027.
- Rebalance the burden of energy costs from electricity to
gas by reducing electricity non-commodity costs and reforming
the system of energy intensive subsidies.
- Ensure the extension of the Payment Systems Regulator's
(PSR) existing market reviews into cross-border interchange,
card scheme and processing fees to further include commercial
interchange fees and to ensure that the reviews result in
meaningful action for merchants and customers.
