The report, published by the Commons Treasury Committee, concludes that business rates are outpacing inflation and growing as a proportion of the tax paid by business.
It notes that the current system favours online retailers over those operating on the high street, and advises the government to examine alternative ideas in time for next year’s spring statement.
“We’re pleased to see the Committee recognising the burden of business rates has grown and the system no longer works,” says UKHospitality chief executive Kate Nicholls.
“The current system is nowhere near flexible enough and it has directly contributed to the decline of high streets.
“Hospitality businesses are at a particular disadvantage and have been arguably hammered worse than any other sector. The current system penalises businesses who invest in their properties and actually acts as a deterrent to investment. We need a complete rethink of the system and an overhaul to bring it in line with the 21st Century.”
A summary of the report calls on the government to explain whether it is deliberate that, since business rates were introduced in their current form in 1990, the revenue they have generated has outpaced inflation.
“Tweaking the current system of business rates through an increasingly complex web of reliefs does little to address the negative aspects of this tax and simply demonstrates how broken the system is,” it says.
It adds that while the government takes a deeper look at proper alternatives, initial improvements such as reducing statutory limits for responding to appeals, and ensuring that the Valuation Office Agency (VOA) is properly resourced, could be made.
“We are pleased that policy-makers are listening to the concerns of businesses and acknowledging that there must now be action,” adds Nicholls.
“There must be, as the Committee recommends, a consultation at the soonest opportunity to identify alternatives to the current system. The incoming Government must act on this as a priority. We will be keeping up the pressure with recommendations to ensure fairness for hospitality.”