Tax breaks for council-run leisure services are putting local firms out of business, says a go-kart track manager.
Local authorities operate many of their sporting and cultural activities through arm’s length organisations (ALEOs), which have relief from VAT and business rates.
Andrew Sinclair, who runs Kartstart centres in Kirkcaldy and Aberdeen, said it is “sickening” private firms have to shoulder those costs when their rivals do not.
Mr Sinclair described it as “uneven playing field which has been created for the benefit of the council facilities”.
“It is not only sports facilities that are in this situation, it is their golf courses, concert halls, anything at all which competes in the leisure sector,” he said.
“More importantly, whilst they do not pay any rates at all they are exempt from VAT as well, which creates a very uneven playing field for anybody in private business competing against a council-run business.”
Mr Sinclair added: “The whole situation has become quite sickening for many businesses to the point it is not worth continuing to trade.”
ALEOs have been praised as a way of keep council costs down amid funding cuts.
A report by spending watchdog Accounts Commission said Leisure and Culture Dundee, an ALEO, had made savings of £15 million since it was founded in 2011.
In Fife, the commission reported a “50 per cent reduction in costs and a 50 per cent increase in service uptake for sports and leisure” between 2008 and 2016 through ALEOs.
Last year’s Barclay review, which was commissioned by ministers, recommended that relief should end for ALEOs, saying councils were setting them up for “tax avoidance” purposes.
The Scottish Government rejected that suggestion, but said it would remove the rates break for new ALEOs, as well as new facilities for existing organisations.
Labour MSP Jenny Marra has slated that as a “sports tax” that will make it harder to improve Scotland’s ailing record on public health.
Elaine Muir, Fife Council’s head of finance, said: “The council aims to increase public participation in sport, active recreation and physical activity and to encourage people to live healthier lives.
“This is part of our preventative strategy to stop longer-term issues developing and reduce people’s dependency on public services.”
She added: “As registered charities, trusts are governed by specific regulations, including VAT exemptions on charitable activities and charitable rate relief.
“However, any small or growing local business seeking support or business advice can contact Business Gateway for assistance.”
