EDITOR’S COMMENT: Ed Sheeran waded into the debate around business rates this week.
Picking up the accounts of Ed Sheeran Ltd, The Sun reported that the balladeer’s business turned over £32.3m last year, at a gross profit of £27.4m. But it was his tax bill for the year that stood out at £5.3m, it was more than Amazon’s. On a UK turnover of £2bn, the US online giant paid just £4.5m in corporation tax.
If Sheeran’s contribution to the debate was unwitting, Tesco chief executive Dave Lewis’s was far more pointed. Calling for chancellor Philip Hammond to impose a 2% charge on goods sold online – a move which could raise £1.25bn – Lewis said: “Three years ago I talked about a potential lethal cocktail of pressures in the retail industry and now you are seeing that come to fruition.”
Talk of a digital services tax is finding sympathy in government. At the Conservative Party conference in Birmingham, Hammond had expressed sympathy for the idea. His preference would be for multilateral action but he is willing to go it alone if necessary.
That could happen as soon as the Budget on 29 October.
Ministers might be tempted to use the money to support spending elsewhere but there is a strong case for using the revenues raised to cushion business rates bills. Lewis believes it could support a cut of 20%. That could be the difference between life and death for some retailers.
As compelling as the case for reforming the business rates system might be, ministers will be reluctant. The tax accounts for 42% of total tax revenue (£28.8bn) and 20% of local government’s local funding. Politicians will never want to risk bringing in reforms that create silent winners and vocal losers – especially when there is talk of a general election.
Proof of that reluctance was visible in a House of Commons debate on business rates on Tuesday night.
Yes it was an adjournment debate – never a piece of Commons business to draw a large crowd, – but the number of MPs there was profoundly disappointing. Just six of 650 turned up.
It smacked of political indifference to an issue that is costing livelihoods, driving up vacancy and blighting communities. It suggested suspicion of business, too. And it almost certainly confirmed an inability to multi-task in an environment where the agenda is so dominated by a single issue.
More than that the image of acres of highly visible, green Commons leather – where engaged MPs should be sat – suggests reform of business rates will remain in the box marked “too difficult” for a long while yet.
But that doesn’t mean that a digital services tax won’t be in the Treasury’s sights. Should it do so, it must use at least some of the revenue to mitigate the impact of business rates.
■ This could be a significant Budget for real estate. Will the chancellor lend support to the CaMKOx growth corridor? (And will he come up with a better name for the ambition to develop the economies of Cambridge, Milton Keynes and Oxford?) What further support will he offer for housebuilding? (Hopefully it will be more supply side than demand side.) And will he commit to continuing infrastructure investment to keep the UK investible?
With likely tax reform, it all adds up to a big Budget for the sector and a massively significant one for UK plc
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