Tuesday, 24 September 2013

Homey-In-Chief Emeritus* on top form

From City AM:

WHAT, exactly, does the Labour party think it is doing? It wants to hike – yes, hike – corporation tax if it is elected in 2015, the latest of a long list of utterly destructive policies unveiled in recent days. The idea is that this will "pay" for a freeze in business rates on small firms, which means that the net burden on business will remain unchanged.

But this is a nonsensical idea on every level, not least because every sensible nation is reducing its tax rates on profits to try and woo globally mobile firms, and the UK's efforts had started to be noticed internationally.


All good stuff so far, low taxes on income attract businesses and wealthy people; high taxes on income drive them away. But you cannot drive land or landowners away and any tax thereon (e.g. Business Rates) merely reduces the price which a new entrant has to pay for the land (purchase price or rent).

Having made a good start, he then goes completely off the rails and contradicts his first two paragraphs:

Yes, business rates – which are levied on premises – are an appalling, antiquated tax (1) and are accelerating the demise of the high street.(2) Rates favour online firms with more limited premises.(3) Many retailers – such as Tesco or Sainsbury – pay far more in business rates than they do in corporation tax.(4)

1) He says "antiquated", I say "tried and tested".

2) Business Rates are levied on all business premises - including out-of-town shopping centres. So that's a level playing field. And by and large, high street shops are actually owned by smaller landlords or might be owner-occupied. Out-of-town shopping centres are usually owned by huge multinationals. So these multinationals are using the "small independent retailer" as a convenient human shield (see also "Poor Widows In Mansions").

Further, all tenants care about is the total bill of rent plus rates, they do not care how it is split up. So instead of arguing that rates are too high, you could equally argue that rents are too high and there's a free market solution to that.

NB, it's all about car parking (and bus routes etc.), actually. That's what "the high street" needs most.

3) Online retailers use land more efficiently, they can manage with lower value sites for their warehouses, so they pay less in rent and less in Business Rates. What's his problem?

4) That's their choice, isn't it? If they couldn't secure a huge advantage by owning prime sites with big car parks, they simply wouldn't pay the Business Rates. They also spend a lot more on wages and goods for resale than on Business Rates and corporation tax put together, so does he go on to suggest that people should be willing to work for free or provide goods for resale for free?

And like a true Faux Lib, he does not mention VAT at all, even though Tesco and Sainsbury pay far more in VAT than in Business Rates and corporation tax put together.

* This vital role is now being carried out jointly by Mark Carnage and Georgon Osbrown.

5 comments:

Lola said...

I am beginning to get very angy indeed with people like AH and their utter stupidity when it comes to business rates. Or, their total deceit in acting as a cheer leader for landlords and bankers. Nearly time for a little 'direct action'?

Mark Wadsworth said...

L, indeed.

And what is AH's stand if, for example, an "internationally mobile business" decides to set up its internet operations or online selling (head office, warehouse etc) in the UK?

Is that A Good Thing or A Bad Thing (because they are "killing the High Street and avoiding Business Rates by trading from cheaper premises)?

Kj said...

Pretty shit suggestion from labour though, that much is correct.

Lola said...

I've made a very caustic comment on AH article. It's awaiting 'moderation'. What's the betting it doesn't get published?

Mark Wadsworth said...

Kj, shit, but not extremely ludicrously shit.

L, they probably won't, if you leave a few negative comments they blacklist you.