Saturday 7 April 2012

Enterprise Zones

From a report commissioned by HM Revenue & Customs

1 The overall objective of this study was to examine whether rents changed in response to an exemption from National Non Domestic Rates (NNDR, also known as business rates). The method adopted was to use Enterprise Zones (EZs), where no business rates were payable while the zone was in force, as a control group against which to assess properties with similar characteristics but receiving no relief from business rates. The nature of the relationship between rents and NNDR was investigated using the change in EZ-related NNDR status as the trigger point for altering the negotiation stance between landlord and tenant.

2 The main conclusion is that 100% of the benefits from NNDR relief are passed into rents and therefore accrue to landlords, although the range of uncertainty surrounding this statistical estimate1 puts the boundary at somewhere between 65% and 150%. Either way, the general conclusion is that the majority of tax-saving benefits from NNDR exemption on EZs accrued to landlords rather than to tenants.

8 comments:

chefdave said...

Nice find!

Well it doesn't take a genius to work out what would happen, they tried this in the 80's and the results were identical. So now their groundbreaking study has yielded some valuable information they're obviously going to raise rates and lower consumption taxes to squeeze out the parasitic landlord class?

Mark Wadsworth said...

CD, it's amazing what you can find down the back of the internet, I was looking for something completely different actually (I'm writing a once-and-for-all manifesto).

mombers said...

And in consideration of this report, the government decided to shift all taxation onto land as their is no dead weight loss.

neil craig said...

Interesting. It rather looks like the rents are considerably higher than the regulatory savings say they "should " be.

That would be consistent with there being a great advantage to being in an enterprize zone that is worth paying for. I would take that as being the advantage of being in an industrial "hub" area beside your competitors/suppliers/future employees. A la Harley Street or Silicon Valley.

If so it says a lot about the cost/benefit of establishing such industrial hubs early and of being in a developed country.

Mark Wadsworth said...

M. amazingly enough, no.

S, yeah but his just played into the hands of the banks and landowners. Funny you should mention the stupid display ban, I would have included scrapping that in the manifesto but couldn't really work out under which heading.

I feel desperately sorry for the people in the supermarkets who have to pull open these stupid shutters a hundred times a day, it must be bad for your back as well as humiliating.

Mark Wadsworth said...

NC, that's exactly what the research doesn't say! It says that from the point of view of the tenant, the actual business, there is no advantage in being in such a "hub".

By all means let's have more such "hubs" but there is no need to allow the landlords to collect all the benefits from taxpayer funded expenditure. In a sane world, the Business Rates (or LVT or whatever) would be collected in full and used to pay for the extra stuff which turns an area into a "hub".

Sarton Bander said...

Like I say

Ricardo's law is as sound as Newton's law of Gravity is.

Sarton Bander said...

>The main conclusion is that 100% of the benefits from NNDR relief are passed into rents and therefore accrue to landlords

One might think that was the WHOLE point....