Killer Arguments Against LVT, Not (409)

Via MBK from The Times:

The row over business rates, with Tory MPs leading the charge against rises for small companies, has prompted a rethink in the Treasury about the whole way in which companies are taxed. 

Again, there will be short-term relief in the budget for some of those hit by the recent revaluation, but Mr Hammond has become convinced that much wider changes are required in the longer term.

In his view, it is unfair and anachronistic for businesses to be charged on the basis of the value of property when many of the most lucrative enterprises now operate online. There could be a review of business rates, which date back to 1572, as part of an overhaul designed to make corporate taxation fit for the 21st century.

A tax on land values is not a tax on business, or households, or farmers. It is a 'tax' (actually, a user charge for benefits received/burden placed on those excluded*) on land owners. People owned land in 1572, they own land today, they will continue to own it for as long as nation-states exist and permit it. The basic concept is the same, what you (are allowed to) do with it is a separate issue, but clearly you hold it for some purpose or other.

A business (or a household or a farmer) which pays rent (or a mortgage) is just paying privately collected tax, so turning his non-logic round, we might as well say that "It is unfair and anachronistic for businesses to be charged rent based on the value of the premises they occupy" which is surely nonsense.

At the same time, the chancellor is determined to ensure that companies are taxed properly on the profits they make in this country — even if their customers are on the internet rather than physically going into a shop. For him this is not about waging a political war on “fat cat” multi-national corporations, such as Google and Facebook, but a question of making the system fit for purpose in the digital age.

Can we stop wailing about small, local retailers on The High Street and blaming their woes on glorified mail order services like Amazon**? If you want to run a small, local business from the High Street, then provide services - hair dressing, repairing mobile phones, a café, estate agent, launderette, whatever - where there are little or no economies of scale - Amazon will never put them out of business. If you want to run something really niche, like second hand books, then the High Street is probably not the place for you, you can sell your stuff via, er, Amazon.

* Which is why Good Queen Bess introduced Poor Rates in the first place - to finance a very rudimentary welfare system.

** If we think that Amazon et al are taking the piss on corporation tax - and there is evidence to suggest they are - then it's easiest to just charge them higher Business Rates on their massive distribution centres and get the money that way.

Business Rates

From Sky (h/t tip Bayard for pointing me to this):

The Committee urges ministers to give a six-month business rates amnesty for firms occupying empty properties and there should be an examination of whether retail taxes should be based on sales rather than the rateable value of a property.

The MPs also suggested that retail needed its own system of business taxation, adding that a six-month amnesty would encourage new businesses to the high street.

No, you cretins, no. If you base it on sales then owners are more likely to leave shops empty. No sales, no tax.

Retail is at its most successful with a full town centre/shopping centre/retail park of varied shops . If you encourage people more to leave shops empty, they're more likely to do so. But it doesn't just affect that shop - it makes all the others less valuable too.

Mark's covered this in posts about agglomeration, but in a nutshell, someone looking for a pair of spectacles, a new coat and some shoes for the kids would much rather go to one place with a number of providers so they can do it all in one trip. If you lose the kids shoe shops from your town, the shopper might decide to go to the next town because they don't want to do the specs and coat in one and then go to the next town for the rest.

It's also why the death of bricks and mortar retail hasn't been uniform. What we've seen is some places are still doing fine and others are struggling. As bricks and mortar reduced and travel got easier, it agglomerated in fewer, better places. A woman looking for a coat would much rather travel half an hour to have a huge range of coat shops than waste their time with a small number of shops.

This then has a snowball effect that the losing towns/cities lose shops and go downhill. That's why Bath has a thriving shopping centre and Swindon and Chippenham don't. Bath was always a better but it's now a lot better.

Charity Shops and Footfall

From the BBC

Charity shops boost local business, combat unemployment and even help tackle social isolation, according to a report by the think tank Demos.

The report says despite negative perceptions there is "no evidence" the shops cause "High Street decline".

Councils should "do more to support charity shops", the report adds.

The rising number of charity shops has led to calls to limit their numbers, but the report says the benefits they bring are "often unrecognised".

I've had a read of the Demos report, which, being Demos is full of terms like "social value" that should clue you in to the sort of people writing it. It includes quotes from charity shops and landlords about the benefits of charity shops, including the benefits to other shops, but they couldn't seem to find a non-charity shop owner who thought they were a good idea. It's real aim is to defend the dodging of business rates, despite the fact that charities already get tax and VAT relief.

Going back to Mark Wadworth's post about shopping centres and how the owners control the mix of shops, it's worth nothing that places like The Oracle, Cribbs Causeway and Central Milton Keynes don't have charity shops. They don't think that having an Oxfam shop in their centre is going to bring people in, or more accurately, that the people they bring in aren't going to be the people that the other shops in their centre want.

But that is a certain sort of shop, generally more middle- to upmarket ones.

The footfall that a charity shop is going to increase is the footfall of people on lower incomes. It's going to help shops like Poundland or CEX. And for that, I'm somewhat tickled because the sort of people who are most vocal about saving the High Street aren't just against boarded up High Streets, they want a gentrified High St full of small tasteful independent shops, and not the likes of Poundland or CEX.