Press Release: Let councils replace business rates with a tax on land values

For Immediate Release | For further comments or to arrange an interview, contact Kate Andrews at kate@adamsmith.org / 07584 778 207

Commenting on the devolution of business rates to local councils, Sam Bowman, Deputy Director of the Adam Smith Institute said:

"What few people, including the Chancellor, seem to realise is that often, it isn't businesses who bear the cost of business rates, but landowners. Over time, most of any cut in business rates will be offset by a proportionate rise in rents - meaning that it's predominantly the landlords who benefit from cuts and lose out from rises, not businesses.(eg http://etheses.lse.ac.uk/2658/ and http://www.ifs.org.uk/uploads/mirrleesreview/design/ch16.pdf) Most of the debate around today's announcement will ignore this crucial fact.

"Business rates discourage investment, because they tax the value of property, and not just the land it is built on. A better idea would be to merge the council tax and business rates systems into a simple tax on land values. This would prevent distortion between whether land is used for residential or commercial purposes, and ensure that business investment is not discouraged. Revaluations can, and should, be done on a regular basis - council tax is in particular need of a revaluation, having never been reviewed since it was first set up in 1993.

"Business rates are far from the ideal. The government would be wise to reform and simplify the current system, to address discrimination between commercial and residential land use."

Notes to editors:

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.