Two leading property industry trade bodies have warned that unless government significantly changes the business rates system, businesses could face a 60% rate of tax by 2022.
In a joint response to
the government's review of business rates, the British Property Federation (BPF) and British Council of Shopping Centres (BCSC) have outlined how out of kilter the tax is with rental values, which have grown only 5% since 2000 and remain lower than their 2007 high.
The response cites research by a number of rating surveyors which suggests that the business rates multiplier applying after the 2017 business rates revaluation will represent a tax rate of over 50% - which is likely to increase to nearly 60% by 2022.
The multiplier, which determines how high the business rates bill will be, is currently set at 49.3%.
Given that the UK already has one of the highest rates of property tax in the Organisation for Economic Co-operation and Development (OECD), both the BPF and BCSC are concerned that this tax rate will negatively affect the UK's competitiveness.
They argue that such a high tax rate could, by putting additional pressure on rents, further discourage additional investment in real estate, particularly in more marginal locations. This would deprive small and growing companies of the space they need in order to thrive.
The organisations want a fixed business rates multiplier rather one determined by RPI, which would align business rates more closely with wider economic conditions.
BCSC director of policy and public affairs Edward Cooke commented: "The current business rates system is an unsustainable way of raising tax to contribute towards running local public services. This has been reiterated time and time again, and ministers' statements and this review are an acknowledgement of this.
"Now government has a chance to show business that it believes in great British retailers and vibrant places as a key part of a multichannel retail future. The market in which these businesses operate is changing faster than ever and a tax system that reflects these fluctuations is critical."