Darling refuses to back down on £1.6billion retail tax hike
By Michael Lea
Last updated at 11:40 PM on 06th March 2009
Alistair Darling is refusing to freeze a £1.6billion tax increase on
retailers - who are already at breaking point because of nose-diving
sales.
The Chancellor has come under pressure to hold off the five per cent
increase in business rates due to hit all companies next month.
It is based on the retail prices index from last September. This has
since dropped dramatically and is even forecast to be negative later
this year as the recession has taken hold.
Already major high street outlets, such as Woolworths and MFI, have gone
to the wall, with the loss of thousands of jobs.
Many more are predicted to either fail or be forced into closures and
job cuts as companies face the toughest conditions in 25 years.
Official retail sales figures suggest that shoppers took advantage of
deep discounts in December with volumes rising 1.6 per cent. However,
there was no boost to profit margins.
Sales values actually suffered the biggest drop since 1986, according to
the Office for National Statistics and consumer demand is continuing to
fall.
Dozens of retail chiefs have attacked the Government's plan to increase
business rates, claiming it will add tens of millions of pounds to their
tax bills at the worst possible time.
The trade magazine Retail Week has been running a campaign - Rate Rage -
to force the Treasury into a re-think.
However, in a letter to the publication this week, Mr Darling insisted:
'There are no plans to amend this system for 2009-10 and freezing
business rates for 2009-10 would cost almost £1billion.'
Debenhams chief executive Rob Templeman said: 'No retailer is happy with
the five per cent increase. It doesn't reflect where inflation is now
and what's happening in the economy.'
Ian Cheshire, boss of Kingfisher, which owns B&Q, warned that many
retailers will find the rates rise, which comes into force on April 1,
'pushes them under'. He said it was 'completely inappropriate'
Sir Philip Green, whose Arcadia company owns Topshop, Burton and Dorothy
Perkins, said the rise was shocking.
After rent and staff, business rates are typically the third biggest
cost to many retailers.
They are the equivalent of council tax for companies which occupy non-
domestic properties and are based on the rateable value of the premises,
roughly equivalent to the cost of one year's rent.
In another blow for many firms, transitional relief from a 2005
revaluation of commercial properties has also expired, which will push
up bills even further from next month.
The Tories pledged yesterday to cut taxes and paperwork for small shops
and firms by ensuring that business rate relief - worth up to 50 per
cent - is applied automatically.
Currently companies in premises with a rateable value less than £15,000
- £21,500 in London - have to fill out a form to claim a rebate.
Tory Treasury spokesman Philip Hammond said: ' Businesses are facing
tough times in Labour's recession, but Gordon Brown seems to be doing
nothing to help them.'
A spokesman for the Department of Communities and Local Government said:
'The Government keeps all tax policy under review, but there are no
plans to amend the business rates system.'
He said freezing rates for next year 'would not significantly help
individual businesses'.
* Thousands of jobs are under threat at clothing retailer Principles
and catalogue brand Freemans.
Principles was part of Mosaic Fashions, which was left reeling by
the collapse of Icelandic investment group Baugur last month.
Mosaic went into administration on Monday, but four of its brands
- Karen Millen, Oasis, Warehouse and Coast --were saved.
However, Principles and Shoe Studio were left in the hands of the
administrators.
Last night, Debenhams was on the brink of a deal to buy
Principles' stock. It is believed it will also save the 121 Principles
concessions in its own stores. It is feared the deal will not save the
jobs of the 2,300 staff employed by Principles.
Home shopping giant Freemans Grattan Holdings revealed that more
than 1,000 jobs could be axed as it closes operations in Bradford,
Peterborough and London.
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