Business leaders are sounding the alarm over a potential increase in business rates as part of this year’s budget, amid concerns that corporate tax burdens could top 50% for the first time since Scottish devolution.
The Scottish Retail Consortium (SRC) has revealed through its analysis that an inflationary uplift in rates could saddle businesses with an additional £13 million in taxes.
Last month saw inflation fall to a three-and-a-half-year low of 1.7%, a figure ministers often consider when setting business rates for the coming fiscal period.
However, the SRC is cautioning against any further tax hikes, highlighting that retail sales in Scotland continue to stagnate while businesses grapple with rising costs and new regulations on matters such as environmental sustainability, anti-obesity measures, and minimum wage requirements.
The organisation points out that business rates have hit a 25-year peak and that any rate increase tied to inflation could push tax rates for companies beyond the 50% mark.
Moreover, the SRC notes that medium to large stores have already experienced a 6.7% increase in the intermediate and higher property tax bands, placing the roughly 2,500 shops subject to the higher tax band in Scotland in a less competitive position than their counterparts in England.
In September, Finance Secretary Shona Robison announced intentions to slash up to £500 million from this year’s spending and to deploy up to £460 million from the revenues of the ScotWind leasing round, all while expressing concern over the “enormous and growing” fiscal challenges facing the nation as she seeks to deliver a balanced budget.
David Lonsdale, director of the Scottish Retail Consortium (SRC), has called on the Scottish Government to avoid raising business rates amidst challenging trading conditions.
He commented: “Retail sales have flatlined over the past year and trading conditions remain challenging.”
“Despite this, it seems a chunky £13 million extra could be added to retailers’ rates bills next spring.”
“With the business rate already at a 25-year high, a far more ambitious and coherent approach is urgently required, one which views rates as a means of stimulating commercial investment in retail destinations rather than squeezing yet more tax revenue. Increasing taxes further could exacerbate the problem.”
“We hope Scottish Ministers will act in the Budget to focus on economic growth and help make Scotland the best place to grow a retail business in the UK, by ruling out any increase in the business rate and by shelving the mooted surtax on grocery stores.”
Finance Secretary Shona Robison said: “The 2024-25 Scottish budget delivers a competitive non-domestic rates regime including the lowest poundage in the UK for the sixth year in a row, and a package of reliefs worth an estimated £685 million.
“Our Small Business Bonus Scheme remains the most generous of its kind in the UK. Decisions on non-domestic rates for next year will be considered in the context of the Scottish budget 2025-26.”
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