News

September 27, 2013

Labour plan will "rob Peter to pay Paul" – BCC

Labour's promise to freeze business rates has been broadly welcomed by business groups. However, the proposals come at a cost that many business commentators are not happy with – an increase in corporation tax.

Simon Walker, director general of the IoD, said: "The IoD welcomes any commitment to reduce the burden of business rates [but] Labour's plan to finance this by abolishing the proposed cut in the main corporation tax rate is not a price worth paying. The main corporation tax rate is paid not only by multinational corporations and FTSE100 companies but by medium-sized companies and smaller firms."

John Longworth, director general of the British Chambers of Commerce (BCC), said: "We support a freeze on business rates, but Labour must realise that you can't rob Peter to pay Paul. Business rates are an iniquitous tax and a drag on business – hitting companies of all sizes long before they make profits.

"Mr Miliband's proposals hit the investment potential of our crucial medium-sized companies, who are the backbone of the real economy. Labour's plan will be paid for by any firm with profits of over £300,000 – not exactly 'large'. To create an environment where companies can thrive, both business rates and corporation tax rates have to be contained, and the broken business rates system fundamentally reformed."

However, other business groups and entrepreneurs were more positive about the proposals. Jason Stockwood, CEO of Simply Business, said: "Ed Miliband is right to propose that the planned rise in business rates should be scrapped for small firms. The Labour leader has been criticised by big business groups for 'tinkering', but he has recognised that business rates are set to be an increasingly onerous expense for the SMEs."

Alex Jackman, head of policy at the Forum of Private Business (FPB). "This policy will be welcome help for our members. It is not ideal that this freeze would be funded from a reversal of a corporation tax reduction, but since the small firms' rate was to remain the same, this tax change should benefit small businesses."

Research by the Federation of Small Businesses (FSB) shows that business rates are hitting small firms hard – 7% of SMEs actually pay more in rates than they do in rent. Mike Cherry, FSB national policy chairman, said: "We need a simpler and fairer tax system across business rates and corporation tax that is fit for the 21st century, promoting and rewarding enterprise and working for firms regardless of their size."

Image: EdMiliband on Flickr

Related resources:

• Commercial property taxes ARTICLE
• How are business rates calculated? VIDEO
• 94% of small firms feel business rates are too high NEWS