Thursday, 27 August 2015

No wonder Scottish retailers are struggling...

... they don't do maths.

From some some special pleading by the Scottish Retail Consortium aka Scottish Commercial Landlords Consortium:

3. The retail industry contributes around £2 billion in taxes per year in Scotland across the top five taxes of VAT, income tax, national insurance, business rates and corporation tax. Of the £2 billion, retail contributed close to £700 million in business rates...

5. In 2005, business rates made up around one-third of all taxes borne by retailers. By 2014 this had grown to nearly 50 per cent.

Have I missed something or are they deliberately lying?

They sat they pay £2,000 million in taxes, of which £700 million is Business Rates. That means Business Rates make up about 35 per cent of their total tax bill, not 50 per cent. So the share has gone up from "around one-third" to about 35 per cent, in other words "not at all".

And I find it baffling that they focus so much on Business Rates. Their single largest tax bill is going to be VAT. Total UK VAT receipts are over £100 billion a year; total Business Rates receipts under £30 billion. And if it's not VAT, then it will be PAYE. Business Rates will be a distant third and corporation tax will be an even more distant fourth.

Or put it another way, even their £2 billion total is highly suspect. According to this, total UK retail sales alone are about £350 bn a year, £58 billion of that is VAT (paid directly to the government or paid indirectly as input tax which their suppliers pay to the government). Scale that down for Scotland and that's about £5 billion. Even if we politely ignore input VAT, the total they pay directly will be more than half of that, call it £3 billion?

Either way, we have to assume that they pay about four times as much in VAT as they do in Business Rates.

(H/t Thomas Hall and Lola).


Lola said...

But it's not just that. The fact is that VAT is a tax on wealth and transactions and hence must have huge deadweight costs. Whereas business rates, aka a tax on rents, is a tax on - rents. And since land is not the result of production has zero deadweight costs.
The man is an idiot.

Mark Wadsworth said...

L, exactly. For every £1 VAT cut, businesses are about £2 better off. But group think is that VAT does not affect businesses - it is a "tax on consumption".

Ben Jamin' said...

Tim Worstall has been banging on about UBR at Forbes for a while now. Over at the ASI his latest blog is titled "If even business doesn’t get this then what hope?"

The answer is not all businesses pay rent. For those that don't, not paying UBR means they can run a less efficient business than those who do.

F**k capitalism and competitive markets. What businesses really, really want are State subsidies and special privileges.

Deadweight losses? Who cares if you are CEO on a million plus salary? What you want is an easy life, with competition stifled by the tax system.

Cheque in the post to Tory/Labour central office to make sure nothing ever changes. Peerages all round.

Lola said...

BJ Precisely. The difference between 'private' enterprise and 'free' enterprise mostly, and conveniently, escapes 'businessmen'. As Adam Smith says: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.
Here are some more:
I frequently have this argument at the various business networking functions I attend..