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Jeremy Warner nearly gets it
Emailed in independently by Lola and Mombers (who suggested the post title), more wailing about Business Rates in The Telegraph:
This is obviously very welcome news, but it is small thanks to a Government which seems to be doing its level best to make the costs and complexity of doing business in Britain ever more burdensome.
The latest example of such wrong-headedness is in changes to the business rates system, due to come into effect next April. For some businesses, they mean an immediate increase in the tax on their properties of 42 per cent, with still worse to come in future years. Particularly badly hit will be smaller traders in London and the South East. Many face an eventual doubling or worse in their rates bill.
A significant number will be broken by the increases, and in despair close up shop (1). Others will find ways of passing the extra costs on to their customers (2), or alternatively demand rent reductions from landlords (3). Still more will simply take the hit to profits and invest less (4).
The first outcome is pure speculation, the shop is there and somebody will always want to use it.
The second is nonsense, we know for a fact that the total rent and rates bill does not affect output prices, because retail prices are the same whether you shop in a high rent/rates area or a low rent/rates area.
As it happens, UK retail sales are in the order of £400 billion a year and the total increase in UK retailers business rates bills is going to be about £500 million a year, i.e. one-eigth of a percent of turnover, with many retailers outside London and the South East enjoying rates reductions.
The third is the most likely outcome for commercial tenants, although there will be a nasty transition period between the rates increase and the next rent review, which is one of the flaws of making the tenant not the owner legally liable for the business rates.
The last suggested outcome is nonsense, whatever the rent plus rates bill, a good investment is a good investment, and if there are good investment opportunities available, people will avail themselves. You could even argue that a higher rates bill for owner-occupier businesses will give them the kick up the arse they need to increase profits.
All this is in stark contrast to what he wrote a few years ago:
As it happens, there are some quite strong economic arguments for taxing land and housing more than they are already. Again, many thanks to The Mirrlees Review for drawing my attention to what Winston Churchill, who was from a big land owning family himself, had to say on the matter as early as 1909…
Taxing land value, in other words, is the equivalent of taxing an economic rent – it does not discourage any socially desirable form of wealth creation. Moreover, in a world where both income and capital are increasingly mobile, there are obvious advantages in taxing the physical; it is less easily avoided.
So in an ideal world, you might indeed want to tax land more, while reducing income and other forms of capital taxes to compensate.
Source: http://markwadsworth.blogspot.com/2016/12/jeremy-warner-nearly-gets-it.html
