Business rates and the British high street

[canta_brian]

One I think most of us should be able to get behind. Proposed changes to business rates will see charges on location over size or business. A small shop on the high street will see a big increase in business rates. Big out of town chains won't.

Considering how desolate a lot of British high streets have already become, this extra cost could see yet more vacant shops.

http://bit.ly/2lhiA8N

British residents can sign a petition calling for this to be re-thought. See link above.

[Mellsblue]

The whole system needs scrapping and starting from scratch. It's not fit for the Internet age.

[Mellsblue]

Blimey, that poll takes a very political angle to take on what is a systemic issue. They're coming at it at completely the wrong angle. It's not about Amazon receiving a tax cut, it's about small business paying huge hikes on tax based on the value of their property. A value that they, through the success of their business, have helped to increase.

[canta_brian]

Blimey, that poll takes a very political angle to take on what is a systemic issue. They're coming at it at completely the wrong angle. It's not about Amazon receiving a tax cut, it's about small business paying huge hikes on tax based on the value of their property. A value that they, through the success of their business, have helped to increase.

Agree it is not all about Amazon at all, but you mention not fit for purpose in a digital age. Using amazon as a headline is just there to give a big obvious lumbering example of the issue.

As you say, they should scrap business rates altogether and, I believe, increase corporation tax, or have a local tax levied. I favour the local tax as it would incentivise councils to create a business environment that helps all businesses be profitable, rather than being able to tax space. At the moment they tax you for having a shop and then charge your customers a fortune to park anywhere near you. That sort of thing might actually change if they only see your "rates" money when you make a profit.

[Mellsblue]

Blimey, that poll takes a very political angle to take on what is a systemic issue. They're coming at it at completely the wrong angle. It's not about Amazon receiving a tax cut, it's about small business paying huge hikes on tax based on the value of their property. A value that they, through the success of their business, have helped to increase.

Agree it is not all about Amazon at all, but you mention not fit for purpose in a digital age. Using amazon as a headline is just there to give a big obvious lumbering example of the issue.

As you say, they should scrap business rates altogether and, I believe, increase corporation tax, or have a local tax levied. I favour the local tax as it would incentivise councils to create a business environment that helps all businesses be profitable, rather than being able to tax space. At the moment they tax you for having a shop and then charge your customers a fortune to park anywhere near you. That sort of thing might actually change if they only see your "rates" money when you make a profit.

To me, the use of Amazon as a headline is missing the point and undermines what should be a level headed, pragmatic discussion. We all know 38 degrees political leanings and they have deliberately politicised this to make a wider point that they hate big, multi-nationals. Anyhoo, that's all semantics.

Yep, I think the weighting of the tax should be based around turnover/profit rather than bricks and mortar. The vast majority of small high street businesses won't even own the building so are paying more tax because a property they don't even own has increased in value. I would say pass the tax onto the owner of the property but then you'll just be making the tenant pay more via rent or you'll be damaging pension funds.

[Digby]

Pretty much all tax systems come with drawbacks, and some of the easier models such as VAT are made harder when there's such a gulf in income levels across society.

[Sandydragon]

Blimey, that poll takes a very political angle to take on what is a systemic issue. They're coming at it at completely the wrong angle. It's not about Amazon receiving a tax cut, it's about small business paying huge hikes on tax based on the value of their property. A value that they, through the success of their business, have helped to increase.

Agree it is not all about Amazon at all, but you mention not fit for purpose in a digital age. Using amazon as a headline is just there to give a big obvious lumbering example of the issue.

As you say, they should scrap business rates altogether and, I believe, increase corporation tax, or have a local tax levied. I favour the local tax as it would incentivise councils to create a business environment that helps all businesses be profitable, rather than being able to tax space. At the moment they tax you for having a shop and then charge your customers a fortune to park anywhere near you. That sort of thing might actually change if they only see your "rates" money when you make a profit.

To me, the use of Amazon as a headline is missing the point and undermines what should be a level headed, pragmatic discussion. We all know 38 degrees political leanings and they have deliberately politicised this to make a wider point that they hate big, multi-nationals. Anyhoo, that's all semantics.

Yep, I think the weighting of the tax should be based around turnover/profit rather than bricks and mortar. The vast majority of small high street businesses won't even own the building so are paying more tax because a property they don't even own has increased in value. I would say pass the tax onto the owner of the property but then you'll just be making the tenant pay more via rent or you'll be damaging pension funds.

completely agree.

[Digby]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

[canta_brian]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

I guess the main benefit is that taxing profit helps to redress the benefits gained from size and market dominance. I agree with your point about successful businesses not subsidising the unsuccessful, but vastly higher costs per sale of smaller businesses seems to unfairly secure the position of the biggest companies. (as I type this I can see the arguments against).

Maybe less business taxation and less income tax with greater sales taxes might be the way forward?

[Sandydragon]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

Its not perfect, but its probably a way to make it slightly fairer for smaller businesses. Not all businesses can operate in out of town locations of a garden shed so some kind of premises is important. We also seem to like the idea of the traditional high street, which is a concept in rapid decline. Taxing the building takes no account of the profit margins of the business and could end up putting smaller businesses out of business which seems crazy. Id rather keep them in business and providing jobs, with income derived from income tax and VAT accordingly.

Id prefer a baseline corporation tax, set low, which increased in line with profitability, albeit still not reaching that high a percentage. Local councils need some income and given that businesses do use local services, they should pay some local tax, albeit in line with the type of business they run and the size of the building. This should broadly be in line with council tax rates.

For a small business, paying somewhere in the region of a grand or 2 for local tax plus a form of corporation tax (perhaps there has to be a certain amount of profit for this to kick in?) is less onerous than going from £5000 per year to £20000 a year as some are now finding the change to mean.

[Sandydragon]

I think a key point is defining success. For many small businesses, profit margins are probably reasonably tight, but that doesn't make them unsuccessful as such. I know a lot of small business owners and very few actually pay themselves a wage in order to make their company viable. Its not unusual for profits to be measures in thousands or, if lucky, tens of thousands of pounds, so adding £15000 to the taxation output is a huge slice of profit that will hurt to the point of failure.

Increasing VAT would potentially slow down consumer spending, which is probably best avoided.

[jared_7]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

Profit, especially for the larger public companies, nowadays is almost exclusively used for dividends and stock buybacks, to push up stock prices. In the S&P 500 its estimated over 92% of profits are used for these purposes, R&D over the last 20 years has completely bottomed out in favour of short term financial performance.

I guess in that way taxing profits is the best way of addressing inequality and the almost myopic focus on the financial industry, in that it encourages business to redistribute more of the money they make into reinvestment or employee salaries.

I do understand for smaller companies it is different, often owners pay themselves out of dividends.

[jared_7]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

I guess the main benefit is that taxing profit helps to redress the benefits gained from size and market dominance. I agree with your point about successful businesses not subsidising the unsuccessful, but vastly higher costs per sale of smaller businesses seems to unfairly secure the position of the biggest companies. (as I type this I can see the arguments against).

Maybe less business taxation and less income tax with greater sales taxes might be the way forward?

But sales taxes are hugely regressive, punishing those who have to spend proportionally more of their income.

[Digby]

I think a key point is defining success. For many small businesses, profit margins are probably reasonably tight, but that doesn't make them unsuccessful as such. I know a lot of small business owners and very few actually pay themselves a wage in order to make their company viable. Its not unusual for profits to be measures in thousands or, if lucky, tens of thousands of pounds, so adding £15000 to the taxation output is a huge slice of profit that will hurt to the point of failure.

Increasing VAT would potentially slow down consumer spending, which is probably best avoided.

There's another discussion about what virtues do we want in our companies that this touches on. Do we want business to run at a small profit that justifies the cost of capital that seeks long term stability, and being able to employ people in the long term, or do we want business to run in debt seeking to make as quick and as high a return on capital as possible?

I don't know though that small businesses have to be inherently unprofitable, and too of we shift the model then everyone is operating on the same basis.

[Digby]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

I guess the main benefit is that taxing profit helps to redress the benefits gained from size and market dominance. I agree with your point about successful businesses not subsidising the unsuccessful, but vastly higher costs per sale of smaller businesses seems to unfairly secure the position of the biggest companies. (as I type this I can see the arguments against).

Maybe less business taxation and less income tax with greater sales taxes might be the way forward?

But sales taxes are hugely regressive, punishing those who have to spend proportionally more of their income.

This as mentioned above somewhere is a huge part of the problem. If everyone earnt from £40-70k it'd be a brilliant idea, with salaries going from £12k-£5million it could easily suck.

But we don't have to have a one size fits all policy, there could be activities we seek to tax more than others

[Digby]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

Profit, especially for the larger public companies, nowadays is almost exclusively used for dividends and stock buybacks, to push up stock prices. In the S&P 500 its estimated over 92% of profits are used for these purposes, R&D over the last 20 years has completely bottomed out in favour of short term financial performance.

I guess in that way taxing profits is the best way of addressing inequality and the almost myopic focus on the financial industry, in that it encourages business to redistribute more of the money they make into reinvestment or employee salaries.

I do understand for smaller companies it is different, often owners pay themselves out of dividends.

And dividends attract income tax, and CGT is applied to stock subject to a repurchase offer. Amend the tax due on those if you want, but we don't perhaps need to collect a tax on profits at the company level when one might want that invested instead. We'd need to consider in this where stock is held and to what extent it would be free from tax, as we see with ISAs just for an example.

[Mellsblue]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

In this situation taxing profit makes it affordable. If you make an extra £1 but lose 20p on tax you still have 80p extra. Everyone wins. Under the present system the business has no control over the tax it pays and it's not linked to an ability to pay. If you tax the property the business inside can not necessarily afford as income is not linked to value of the property. For those that are tenants they are being taxed more punitively on an asset in which they have no financial interest.
How would like it if a part of your PAYE (if you're not PAYE just imagine that you are) depended on the value of your employers office. You're earning no more but suddenly your tax bill rises by 10% because a building you have no stake in is more valuable.
I'm all for taxing assets, if done sensibly, but most business owners don't count the property their business in based in as an asset as they don't own it.

[Digby]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

In this situation taxing profit makes it affordable. If you make an extra £1 but lose 20p on tax you still have 80p extra. Everyone wins. Under the present system the business has no control over the tax it pays and it's not linked to an ability to pay. If you tax the property the business inside can not necessarily afford as income is not linked to value of the property. For those that are tenants they are being taxed more punitively on an asset in which they have no financial interest.
How would like it if a part of your PAYE (if you're not PAYE just imagine that you are) depended on the value of your employers office. You're earning no more but suddenly your tax bill rises by 10% because a building you have no stake in is more valuable.
I'm all for taxing assets, if done sensibly, but most business owners don't count the property their business in based in as an asset as they don't own it.

And I don't know everyone does win if we tax profit, reducing the ability of well run companies to expand will inherently make it more difficult for capital to flow to where it can be most advantageous. Though if business rates are to stay, i'd favour shifting them from being based on a property value which the business may or may not have an interest in.

[Eugene Wrayburn]

Property taxes are quite hard to avoid. Hence why a number of people want to increase them in individuals, whilst apparently simultaneously wanting to decrease them on businesses.

As I understand it business rates income is going to be increasingly kept by local councils, and local councils are going to have increased ability to vary them giving them a direct stake in keeping their high streets full of businesses. Lambeth shows how this can work. Old covered markets have been rejuvenated by giving rates holidays to start ups and then rates become payable when businesses establish themselves. This is of course not without controversy.

[Mellsblue]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

In this situation taxing profit makes it affordable. If you make an extra £1 but lose 20p on tax you still have 80p extra. Everyone wins. Under the present system the business has no control over the tax it pays and it's not linked to an ability to pay. If you tax the property the business inside can not necessarily afford as income is not linked to value of the property. For those that are tenants they are being taxed more punitively on an asset in which they have no financial interest.
How would like it if a part of your PAYE (if you're not PAYE just imagine that you are) depended on the value of your employers office. You're earning no more but suddenly your tax bill rises by 10% because a building you have no stake in is more valuable.
I'm all for taxing assets, if done sensibly, but most business owners don't count the property their business in based in as an asset as they don't own it.

And I don't know everyone does win if we tax profit, reducing the ability of well run companies to expand will inherently make it more difficult for capital to flow to where it can be most advantageous. Though if business rates are to stay, i'd favour shifting them from being based on a property value which the business may or may not have an interest in.

Unless you're going to plug the gap somehow the tax will have to be levied in some form. Basing in profit rather than property value seems the fairest way in this scenario.

[Mellsblue]

Property taxes are quite hard to avoid. Hence why a number of people want to increase them in individuals, whilst apparently simultaneously wanting to decrease them on businesses.

As I understand it business rates income is going to be increasingly kept by local councils, and local councils are going to have increased ability to vary them giving them a direct stake in keeping their high streets full of businesses. Lambeth shows how this can work. Old covered markets have been rejuvenated by giving rates holidays to start ups and then rates become payable when businesses establish themselves. This is of course not without controversy.

The central government grant system is being phased out, with all taxes raised by an authority staying with that authority. It will be tough initially for the poorer areas but people do suddenly become creative when they aren't guaranteed funds.

[canta_brian]

Property taxes are quite hard to avoid. Hence why a number of people want to increase them in individuals, whilst apparently simultaneously wanting to decrease them on businesses.

As I understand it business rates income is going to be increasingly kept by local councils, and local councils are going to have increased ability to vary them giving them a direct stake in keeping their high streets full of businesses. Lambeth shows how this can work. Old covered markets have been rejuvenated by giving rates holidays to start ups and then rates become payable when businesses establish themselves. This is of course not without controversy.

As mentioned earlier in the thread, having a locally collected portion of profit based tax would encourage councils to help businesses be more profitable. I mentioned parking charges in city centres as an example.

[jared_7]

Simple question then, what is the virtue of taxing profit? Is that not simply akin to taxing businesses that are doing well in order to in effect subsidise businesses that are not being run so well? And is that not harmful to wanting to grow the economy?

I'm not arguing in this for a low tax economy, I'm quite content that money removed from a business via salary, bonuses, dividends can be happily taxed, I'm just not sold penalising success is a terrific way to levy costs on business.

Profit, especially for the larger public companies, nowadays is almost exclusively used for dividends and stock buybacks, to push up stock prices. In the S&P 500 its estimated over 92% of profits are used for these purposes, R&D over the last 20 years has completely bottomed out in favour of short term financial performance.

I guess in that way taxing profits is the best way of addressing inequality and the almost myopic focus on the financial industry, in that it encourages business to redistribute more of the money they make into reinvestment or employee salaries.

I do understand for smaller companies it is different, often owners pay themselves out of dividends.

And dividends attract income tax, and CGT is applied to stock subject to a repurchase offer. Amend the tax due on those if you want, but we don't perhaps need to collect a tax on profits at the company level when one might want that invested instead. We'd need to consider in this where stock is held and to what extent it would be free from tax, as we see with ISAs just for an example.

What type of people earn dividends or own shares as a means of income? Specifically, what wealth percentile will they most likely fall into?

[Digby]

Profit, especially for the larger public companies, nowadays is almost exclusively used for dividends and stock buybacks, to push up stock prices. In the S&P 500 its estimated over 92% of profits are used for these purposes, R&D over the last 20 years has completely bottomed out in favour of short term financial performance.

I guess in that way taxing profits is the best way of addressing inequality and the almost myopic focus on the financial industry, in that it encourages business to redistribute more of the money they make into reinvestment or employee salaries.

I do understand for smaller companies it is different, often owners pay themselves out of dividends.

And dividends attract income tax, and CGT is applied to stock subject to a repurchase offer. Amend the tax due on those if you want, but we don't perhaps need to collect a tax on profits at the company level when one might want that invested instead. We'd need to consider in this where stock is held and to what extent it would be free from tax, as we see with ISAs just for an example.

What type of people earn dividends or own shares as a means of income? Specifically, what wealth percentile will they most likely fall into?

Not enough, though I happen to think there might have been a shift in this with the arrival of DMA but the crash rather set the level of share ownership back. If you're wanting to make the point that it's those better off then fine, but I don't think that changes in this, i'm not looking to drop the level of tax collected, more the point of removal

[Digby]

In this situation taxing profit makes it affordable. If you make an extra £1 but lose 20p on tax you still have 80p extra. Everyone wins. Under the present system the business has no control over the tax it pays and it's not linked to an ability to pay. If you tax the property the business inside can not necessarily afford as income is not linked to value of the property. For those that are tenants they are being taxed more punitively on an asset in which they have no financial interest.
How would like it if a part of your PAYE (if you're not PAYE just imagine that you are) depended on the value of your employers office. You're earning no more but suddenly your tax bill rises by 10% because a building you have no stake in is more valuable.
I'm all for taxing assets, if done sensibly, but most business owners don't count the property their business in based in as an asset as they don't own it.

And I don't know everyone does win if we tax profit, reducing the ability of well run companies to expand will inherently make it more difficult for capital to flow to where it can be most advantageous. Though if business rates are to stay, i'd favour shifting them from being based on a property value which the business may or may not have an interest in.

Unless you're going to plug the gap somehow the tax will have to be levied in some form. Basing in profit rather than property value seems the fairest way in this scenario.

I'd support moving away from property value tax and away from taxing profit, and yes that would have implications for how and how much tax is collected elsewhere.