Fibre tax no longer fit for purpose?
Picture by BigRiz. Some rights retained.
The current system of business rates is not fit for purpose and needs to be fundamentally reformed, say MPs.
The call could open the way for a reassessment of the so-called fibre tax that makes BT’s competitors pay 20 times more to operate fibre networks. It could also kill efforts by civil servants to tax Wi-Fi hot-spots, which areincreasingly important to backhaul data on mobile broadband networks.
A spokesman for the business, innovation and skills committee said that while its study focused purely on the effect of the tax on the retail sector, it was possible a full review would examine the effect and desirability of the fibre tax.
Normal network operators must pay the tax whether or not they make a profit and in advance of sales. However BT pays the tax in arrears and on profits, while Virgin Media pays based on the number of homes passed by its network.
The committee called for a “wholesale review” to examine whether non-domestic property taxes aka business rates should be based on sales rather than the rateable value of a property and how frequently revaluations should take place, among other things.
The call for the review was prompted by the growing success of e-commerce and consequent slackening in demand for high street premises as a sales channel.
Chairman Adrian Bailey said business rates are one of the highest forms of local property tax in the European Union, adding, “Business rates are the single biggest threat to the survival of retail businesses on the high street. Since the system was created (in the 1600s) the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.
“This is a time for wholesale review and fundamental reform, not for tinkering around the edges. Business rates are not fit for purpose and minor administrative changes will not alter that.
“The government’s retail strategies are full of warm words that fail to address the most debilitating levy on existing businesses and the most crucial deterrent to new businesses appearing on the high street – business rates. Fewer strategies are required; simple, decisive action is needed.”
The government must respond by 4 May.
Br0kenTeleph0n3 
Do not watch this space. Those who really want change in time to make a difference should club together to fund a couple of well targetted appeals to bring valuations based on a “tone list” that is based on out-of-date and partial data into line with current actuals. Attempts to assault the systems as a whole are doomed. The rates system goes back to the Medieval Ship Tax and survived the Civil War, which it helped cause. Use “the system” to get your bit into line with reality.
Philip Virgo
2014/03/06 at 07:54
Thanks for that, Philip, though it makes discouraging reading. A couple of questions for you:
No-one appears to know how much money is collected via business rates (which I find hard to believe, but nowhere is it published), so how do we know what’s at stake, and therefore how much to invest in such a venture, or what is lost if it is scrapped. (The benefit to the exchequer of saving the salaries and benefits of the staff at the Valuation Office Agency might be a big step in the right direction.)
Who would you approach to fund such a venture?
The fibre tax was a party manifesto issue before the last election. Is this a replay with shops instead of networks as the crux, but leading to the same result?
Br0kenTeleph0n3
2014/03/06 at 22:05
How many years have we been hoping for a change on this front now? 10? More? I can recall writing about it a long.. long.. time ago (but not in a galaxy far far away) and so far nothing has happened. So many promises, pledges of reviews.. all have been washed away through the passing of time. I’d like to think this time will be different but the VOA is a historical steamroller against change.
Mark (ISPreview.co.uk)
2014/03/06 at 09:02
There was some progress. The Vtesse decision in the Court of Appeal was split, and the dissenting judge said “there is arguably a gross disparity in BT’s favour between the rateable value of its and Vtesse’s cables.”
But the main point is that business rates are a disincentive to start businesses because they hit cash flow even before the business makes a sale, let alone a profit. For those that persevere, they raise input costs that can only be recovered from higher prices. No wonder local firms have moved manufacturing off-shore to where they don’t face this largely arbitrary opinion (see @PhilipVirgo’s comment) of what a rateable value is.
Br0kenTeleph0n3
2014/03/06 at 22:20
[…] the thing where you get to not pay rates on new fibre until it’s sold and profitable, but only if you’re BT, and Cory Doctorow is worrying about the renewed London property boom eating start-ups so they can […]
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