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NEWS STORY
VAT CHANGE MODEST BUT WELCOME
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| November 24, 2008 |
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The Chancellor is right to attempt to stimulate consumer spending with tax cuts said the British Retail Consortium (BRC).
Reacting to the Pre-Budget Report today (Monday), BRC Director General Stephen Robertson said: "Businesses require certainty. It makes me nervous that the Chancellor has announced several major changes which are only temporary but these are unusual times. With inflation under control, the Chancellor is right to seek to help customers and put the economy back on course to stability. I hope this complex package of measures is economically rather than politically driven."
VAT
On VAT reduction, BRC Director General Stephen Robertson said: "This is a modest but welcome boost for hard-pressed households. It must be just one of a range of reviving measures including cuts in income tax and interest rates. Getting the economy up and running is vital and, in this fiercely competitive climate, our members will certainly be passing this on.
"Shops will cope, but implementing a new VAT rate in just a week will be exceptionally difficult for customers and retailers at their busiest time of year. IT system changes, replacing shelf labels and stickering-over prices on packs will be a mammoth and costly task. Staff will inevitably be diverted away from serving customers. Small retailers will find all this particularly difficult to accommodate.
"The Chancellor himself says we will still be in recession at the end of 2009. That may be economically and practically too soon to reverse this."
Business Rates
In its submission to the Chancellor ahead of today's Pre-Budget Report, the BRC warned that ?fiscal stimulation' should not be confined to personal tax cuts.
Retailers are on the verge of being hit with substantial business rates increases. These will come at a time when their margins are being squeezed dangerously by tough trading conditions. Next April's Business Rates increase is to be based on this September's five per cent RPI. No RPI has been higher since July 1991.
And, a year later, retailers face a massive 16 per cent cumulative increase in Business Rates as a result of the 2010 Revaluation. This compares with increases of 3.1 per cent for office occupiers and 1.5 per cent for industrial occupiers.
The Chancellor made no commitment on these crucial business costs.
On business rates BRC Director General Stephen Robertson said: "Because retailers use a lot of property, business rates have a profound impact on retailers' viability.
"The Chancellor should have reduced next April's excessive business rates increase and postponed the 2010 revaluation. These substantial new burdens can only increase the pressure on fragile businesses and push up prices.
"Retailers are crucial to jobs, customers and communities. In recession our role is even more important. Government should be helping, not hindering. This is a serious oversight."
Empty Property Rates Relief
The BRC is campaigning for the restoration of business rates relief on empty properties. It was removed in April this year.
Previously the first three months a property lay empty were rate free and following that half rates were due. Now empty property is rate free for only the first three months (or six months for industrial and retail warehouses), after which time full business rates are due even if the property remains empty. The change is costing businesses an extra ?1bn a year and encouraging some owners to demolish empty property.
The Chancellor announced properties with a rateable value of less than ?15,000 would be exempt for a year from 2009. He said this includes 70 per cent of empty premises.
On Empty Property Rates Relief BRC Director General Stephen Robertson said:
"The Chancellor is right to accept this tax has failed in its objectives but this goes nowhere near far enough. Relief should be restored to businesses of all sizes suffering from this ill-conceived policy.
"The Government is ignoring the mechanics of the property market at a time when the economic slowdown makes it more likely business premises will fall vacant. In a recession the Government should be alleviating the tax burden on businesses, not increasing them.
"No-one gains by keeping property empty. It's unoccupied because there isn't the demand for it at that time and place. Demanding extra tax is not conjuring up new tenants. It's encouraging owners to demolish buildings and undermining local regeneration."
National Insurance
On the April 2011 National Insurance increase BRC Director General Stephen Robertson said: "Retail employs nearly three million people, 11 per cent of the workforce. In 2011 the Chancellor believes we will just be emerging from recession. This seems an extraordinary time to be increasing this tax on jobs."
Business Tax Payment Terms
On extending payment terms for small businesses, BRC Director General Stephen Robertson said: "This will be especially welcome for small businesses who find managing their cashflow particularly difficult. Along with provision of small business finance and the ability to offset losses against profits made in the last three years this will provide useful help for smaller retailers."
Media Contacts: BRC Press Office 020 7854 8924 Out of hours 07921 605544
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