Saturday, 31 March 2012

From Each According To Their Means ...

Marxism may truly be out of fashion but the loose translation of Marx's 
  "Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen!" 
by old school Socialists as "from each according to their means, to each according to their needs" has always seemed a reasonable enough approach to social and economic responsibility in a 'modern, civilised' society. 

The "Tesco Tax" being introduced in Northern Ireland this weekend is a bold statement by its community  leaders that large businesses including retailers such as Tesco should start paying a little more to the communities they 'serve'. In light of the Portas Review of Britain's high streets and the effect that large out of town retail developments have had on town centres it's only right that the balance is redressed to help small businesses by redistributing the burden of business rates from those least able to pay to those most able to pay. And oh what joy that it's to be introduced on April 1st!

Whilst this is a welcome move for some small businesses more needs to be done to redress the balance between other sectors of the high street and the disparity in business rates- the iniquitous way that pubs are treated compared to other retail businesses. 
The Valuation Office uses a combination of Fair Maintainable Trade, open market rents and the type of services the pub offers (such as food or sports screenings) to calculate the rateable value. The same government agency assesses shops and other businesses solely on the physical area that the business occupies (less allowances for service areas such as toilets and stairwells) with no assessment of what level of trade a "competent operator" running whichever kind of business would generate. 

Another inconsistency is that holiday lettings accommodation have allowable deductions for repairs and maintenance, water rates, depreciation on fixtures and fittings and even the TV Licence! No such allowances are made for pubs (or for that matter shops). And I'll never believe a 'poor farmer' again when their land and most of their business related buildings are exempt from business rates.

Many small pubs (and hence small businesses) occupy roughly the same footprint as their retail neighbours and yet have rateable values significantly more than their counterparts. For instance in my last pub, where we occupied half a building (two of our four floors being the private accommodation on which we also paid Council Tax) the business rates, by dint of the multiplier, for our 'retail' business were 10 times more than that of the non-licensed retailer who occupied the other half of the premises.

Now add in the duties that are attached to the products that pubs sell (and enough of this has been written here and elsewhere) and any reasonable person would start to ask 'why are pubs so disproportionately taxed?' No doubt the answers will be that pubs use more resources such as the police and do more social harm as purveyors of the demon drink. But hang on aren't we already paying for that with duty? Won't some of us be paying for that with the Late Night Levy? 

Isn't it time that there was a complete overhaul of the business rates system? No, it's time to scrap them altogether and tax all businesses in the same way ... from each according to its means, i.e. from their profits. 

Think of the money that could be saved by reducing the Valuation Office's activities with respect to business rates, as an executive agency of HMRC it's officers could be assigned to other duties such as investigating tax avoidance and evasion ... but that's probably too simple a solution for 'Sir Humphrey' and his board even though HMRC's Vision Statement includes this statement:

"We will close the tax gap, our customers will feel that the tax system is simple for them and even-handed"

 (For advice on Business Rates read the article on the How To Run A Pub website)

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