Labour to call for an increase in digital sales tax to fund a cut in business rates

The Labour Party will today lead a half day opposition debate at Westminster in which it will set out its plans for reforming the current business rate system, funded through an increase in digital sales tax.

The move follows work undertaken by the Labour Party to break down recent figures from the Office of National Statistics.  The Party suggests that 332,000 small businesses across the UK are at risk of survival because of the current business rates regime.

Speaking on the BBC Radio 4 ‘Today’ programme this morning, the Shadow Chief Secretary to the Treasury, Pat McFadden said: “We are proposing two things today in a positive proposal for business rates, first of all to freeze business rates next  year, and secondly to increase the threshold for small business rate relief from £15,000 to £25,000 per year.  And we would pay for that by increasing the digital sales tax next year to 12%.”

Continuing, McFadden said: “The proposal is fully costed and it would give much needed help to hard pressed businesses as they try to come out of the covid pandemic and cope with supply chain shortages that we have seen in recent weeks.”

The current business rates regime was introduced in 1990, as a replacement for the old system of domestic and non-domestic rates. Business rates  currently generate £30 billion per year in taxation, but in recent years, the system has come under considerable scrutiny, not least as a result of the growth of online retail and the move to home-working

Ahead of the COP26 summit it Glasgow next week, it has also been suggested that the current system deters businesses from investing in new green technologies.   Currently a business that invests to make its buildings more energy efficient, may subsequently find itself facing an increase in the rateable value of its premises.