Liberal Democrat Lord Fox has argued against the business rates system in an article on the website Public Finance.
He says business rates are based on the value of a building. Any improvements to a building that increases its value also increase the business rates. He gives the example of installing solar panels, which can reduce energy bills but also raises the level of rates paid. He accuses the business rate system of punishing businesses that improve their property, whilst rewarding people who have empty buildings.
The alternative that he and some trade bodies are proposing is a tax on land rather than buildings. He wants commercial property owners to pay this tax but pass it on in the form of higher rents to their tenants. Lord Fox believes that the cost of collecting a land tax would be considerably less than collecting business rates. He also calculates that the revenue raised in this way would likely be higher than business rates.
This policy advocated by Lord Fox is supported by the Liberal Party as well as many non-political organisations. One of them, the Entrepreneur’s Network said that the proposals are:
“exactly the sort of policy entrepreneurs need to thrive.”
The EEF organisation said it was:
“a strong addition to the debate on the future of business rates and property taxation.”
Commercial property investors are used to paying regular commercial mortgage repayments, but it is not clear whether they would also welcome paying land taxes.