24/07/2019.

Peers call for business tax reform

Baroness Neville-Rolfe has called for a radical reform of the nation’s business tax system.

The former Treasury Minister warned in the House of Lords that the current model is dampening business growth, disproportionately burdening SMEs, and placing limitations on the economy.

Baroness Neville-Rolfe said in the Lords that Britain’s tax system is “creaking under the weight of its own complexity,” with the tax code having doubled in length in the past decade due to the addition of “hundreds of complications.”

In addition to increased pressure from complicated tax burdens, businesses are also being faced with a “confusing and growing regulatory system in sector after sector,” further limiting companies’ ability to grow and posing problems in multiple industries.

The Baroness also spoke to criticise recent stamp duty increases of up to 12%, blaming the increases for halting activity in Britain’s housing market and having a “deleterious effect” on factors, such as the movement of labour, which are “vital to our growth.”

Complex tax system is ‘unfair’ to high street firms

The Baroness and other peers echoed calls from business leaders for the current tax system to be reformed to better reflect modern trade practices.

Baroness Neville-Rolfe backed proposals from Tesco CEO Dave Lewis, Timpson founder Sir John Timpson and CBI president John Allen for a “fundamental rethink” of the retail tax system, to rebalance the burden placed on high street firms when compared to online businesses.

“It cannot be right that Amazon paid £4.6m in UK tax in 2017 and the beloved Marks & Spencer paid £98.3m,” she reasoned.

Whilst e-commerce retail businesses have surged in recent years, the way that such companies are taxed has not been updated, with physical retailers facing difficult trading conditions seeing no changes.

The UK’s physical retail businesses paid over £7.5bn in rates last year, while several major e-commerce retailers were taxed a fraction of their brick-and-mortar counterparts.

Many have advocated in favour of a digital services tax, with the proceeds to be used to ease the disproportionate burden of rates on SMEs and high street businesses.

41% of SMEs say tax is slowing growth

Also speaking in the House of Lords, Lord Cavendish advocated for a redress of the tax system to ease the burden placed on small businesses.

“I ask the government to rethink their attitude to the [SME] sector, renew their efforts to understand its troubles and cherish a little all those millions of men and women on whom our future and prosperity depend,” the peer urged.

SMEs, which must manage the combined burden of PAYE, NICs and auto enrolment pension systems, have increasingly identified rates and taxation as key obstacles to business growth in recent years.

41% of small firms cited tax as a burden on business growth in 2017, compared to 36% in 2016.

In addition, the number of small businesses citing “regulation and red tape as a serious inhibitor of growth” also rose over the same period, from 42% in 2016 to 46% in 2017.