• April 2017

Sajid Javid admits plans to align business rates with the digital economy are ‘not the highest priority’

A review of business rates that would better tax the ‘digital economy’ has been sidelined by the Government after Prime Minister Theresa May called for a General Election.

Sajid Javid, the Minister responsible for rates, admitted to MPs that a plan to spread the burden to online firms ‘is not the highest priority’ and is ‘something a future Government may want to look at’.

The comments infuriated smaller business owners, including Theo Paphitis, formerly of BBC2’s Dragons’ Den, who believe traditional high street retailers are losing out to online companies who do not face comparable business rates bills.

Javid, who last month was engulfed in a furore over rates rises, made the statement to a panel of MPs just days ago, dashing hopes of an urgent review.

Business rates are based on property prices and raise about £25billion annually. Many argue the system is damaging the economic viability of Britain’s town centre businesses, while online firms, often based in low-rent warehouses, pay far less.

Javid would only concede to MPs that the Treasury is expected to consult on the matter ‘before 2022’.

Paphitis, who owns stationery supplier Ryman, hardware shop chain Robert Dyas and lingerie group Boux Avenue, said: ‘Javid is so out of touch it’s unbelievable.

‘It’s an unjust tax that is not working and some hard work needs to be done to find a solution as soon as possible. To say this is not a priority proves how far off the pace he is and demonstrates a lack of understanding.’

Javid told MPs: ‘There was a review of rates in 2015 so some of these issues were looked at then. All these issues about online versus offline, and also in town versus out of town, came up.

‘There was a general agreement from most of the business groups – the Institute of Directors, the Confederation of British Industry, the Federation of Small Business and others – that while they could think of many things they didn’t like about the current system, it was quite hard for them to come up with an alternative they might actually prefer.’

Paphitis, who favours a sales-based tax, said: ‘This seems to fly in the face of May’s speeches and everything else the Tory Government is saying about fairness.

‘Looking at this, it seems like anything that requires hard work or is difficult just gets kicked into the long grass. If he is struggling to come up with a solution, [Javid] should come and speak to me.’

The Communities and Local Government committee told Javid it expected to launch its own review into the system, regardless of Javid’s responses and the Treasury’s time frame.

The revelations will heighten concerns that the forthcoming Election will undermine promises made to calm the rates revolt that preceded the Budget.

It also emerged this weekend that money offered to support firms worst hit by this month’s rates changes has been thrown into doubt by the Election. About £300million was promised, but it was unclear last night if that would be made available before June.

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