Business leaders in Tayside and Fife have warned a multi-million pound rates levy on large companies is stifling growth.
New figures show a controversial Scottish Government decision to double the large businesses supplement will cost firms in Tayside and Fife an additional £7 million in rates next year.
Doubling the large businesses supplement from 1.3p in the pound to 2.6p was described as a “modest increase” when announced by then-finance secretary John Swinney in September 2016.
However, the Government has revealed it expects the levy to bring in £127.8m in 2018-19 – £63.9m more than if the rate had been kept the same as the English level.
The levy is applied to any site with a rateable value of more than £35,000 and affects around one in eight commercial premises in Scotland.
In Dundee, the Government expects 708 properties to be liable for the levy next year, bringing in £2.9m.
In Fife, the levy will affect 1,037 sites, costing £7.6m. In Perth & Kinross it is anticipated 535 buildings will be charged £2.2m and in Angus 273 premises will have a £1.1m bill.
Alan Mitchell, chief executive of Fife Chamber of Commerce, said he was concerned the levy – and other taxes such as income tax and land and buildings tax – could potentially lead to businesses leaving the Kingdom.
He said: “At the very least we need a competitive tax regime with our closest and biggest trading partner and with a country whose companies we are competing with for overseas business.
“It can not be good for businesses in Fife and Scotland if they are immediately loaded with extra costs their counterparts and competitors in England are not.
“Fife companies are very proud they are Fife companies and many of them grow and stay based here.
“But if there comes a point where it becomes too expensive to trade in this country then ultimately they will have to make the decision they think is right for the long term viability of the company. That could mean they consider moving out of Fife.”
Dundee and Angus Chamber of Commerce head Alison Henderson said she is concerned the levy means the cost of doing business in Scotland is more than in England.
She said: “It’s important Scotland can be as competitive as possible in order for our business community to thrive, invest and employ people.
“Business rates are just one of the costs a business pays and of course a business will make decisions to invest based on a number of criteria.
“But businesses make difficult decisions based on the big picture and a higher large business rates supplement is not conducive to encouraging business growth.”
David Lonsdale, the director of the Scottish Retail Consortium, called for the Scottish Government to reduce the levy back to the 1.3p level.
He said: “We’ve still to hear a convincing explanation as to why medium sized and larger firms here are thought to be better placed to fork out more in business rates than competitors or counterparts down south.
“As advocated by the Barclay review, who described the supplement as ‘damaging perceptions’ of Scotland, we would like to see a more ambitious timetable for ending this Scotland-only surcharge and restoring a level playing field with England.”
“Tax on ambition”
Conservative North East MSP Bill Bowman described the large business levy as a “tax on ambition”.
He called for the levy to be restored back to 1.3p in the pound as soon as possible.
He said: “The large business supplement is a millstone around the necks of many enterprises and a drag on the economy.
“There has been no commitment to reducing the supplement in line with the UK, other than ‘when it is affordable’.
Mr Bowman added: “In September, I asked the Scottish Government what analysis it has conducted regarding a timescale for reducing the Large Business Supplement during the current parliamentary session,” he said.
“The SNP finance secretary Derek Mackay said that, following the recommendation in the Barclay report for the large business supplement to be reduced, the Scottish Government will consider this, should it become affordable, in the context of future years budgets.”
“Widely welcomed by business”
A Scottish Government spokesperson said the rate of the large business supplement would be considered at future budgets.
“We recently accepted the vast majority of the recommendations of the Barclay Review of non-domestic rates, going beyond Barclay with additional pro-growth measures in a package widely welcomed by business,” the spokesperson said.
“We will consider the large business supplement at future budgets in line with the timetable suggested by Barclay, whilst continuing to provide the most competitive rates relief in the UK, including the small business bonus scheme which alone lifts 100,000 properties out of rates altogether and has saved firms well over a billion pounds since its introduction.”
“Things are getting more difficult”
Graeme Gersok, the owner of the Townhouse Hotel in Arbroath High Street, saw his rates increase by 84% during a recent revaluation, bringing a double blow as the increase meant he was liable for the large business levy.
He said: “I have 27 employees – we’re hardly a large business but because we are successful we are being punished through the rates system.
“For sure things are getting more difficult because all our costs are going up.”
Nicholas Russell, managing director of Balbirnie House Hotel in Fife, added: “Rates are simply another form of taxation, and the levy is one of the many challenges currently presented across the span of UK hospitality.
“Many additional costs are also increasing due to Brexit and there is much general uncertainty due to Brexit itself.
“Having experienced significant business rates increases, it remains to be seen if Scotland’s Government will be able to quickly reduce future business rates for those operators who will see a reduction in trade because of Brexit uncertainty.”
Projected large business supplement for 2018-19
Aberdeenshire – 984 properties – £5m
Angus – 273 properties – £1.1m
Dundee City – 708 properties – £2.9m
Fife – 1,037 properties – £7.6m
Perth & Kinross – 535 properties – £2.2m
Scotland – 22,204 properties – £127.8m