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Labour sets out plans to support high street firms by scrapping business rates and taxing online giants

Lauretta Roberts
27 September 2021

The tax system is “stacked” against high street firms, Labour has warned as it sets out plans to scrap business rates and shift the burden to online giants like Amazon.

At the Labour Party's conference in Brighton, Shadow chancellor Rachel Reeves is set to announce she would freeze business rates next year if she was in No 11, while also offering a cut for small firms, paid for by hiking digital taxes. She committed the next Labour government to abolishing business rates, using the proceeds of a global deal on taxing multinational firms.

“Our high street businesses do so much to enrich our lives and our communities, facing huge adversity in the past year. They are struggling right now, with a cliff edge in rates relief coming up in March. The next Labour government will scrap business rates. We will carry out the biggest overhaul of business taxation in a generation, so our businesses can lead the pack, not watch opportunities go elsewhere," she will outline in her speech.

Reeves will tell Labour’s conference that the current business rates system punishes investment, entrepreneurship and the high street.

The freeze in business rates in 2022/23, and an increase in the threshold for small business relief from £15,000 to £25,000, would be funded by increasing the digital services tax from 2% to 12%.

However Reeves also said Labour would be examining tax loopholes for business. “Some [loopholes] are important but too many simply provide loopholes for those who can afford the best advice. For businesses they create extra layers of complexity to navigate, and added together they cost more than our entire NHS budget.

“We will look at every single tax break. If it doesn’t deliver for the taxpayer or for the economy then we will scrap it.”

Business groups welcomed Labour’s proposals. Mike Cherry, national chairman of the Federation of Small Businesses, said: “The shadow chancellor is right to propose concrete reform of a business rates tax which disproportionately burdens the small businesses and sole traders at the heart of local communities.”

“Business rates is a regressive tax which hits firms before they’ve made a pound in turnover, let alone profit, whilst disincentivising sustainable investment.

“This proposal marks a welcome call to action that would take more small businesses out of the regressive rates system and rightly looks ahead to more fundamental reform.”

Tony Danker, CBI director-general, added: “Change to this outdated system is chronically overdue. The Labour Party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms that will reflect our green ambitions, spur the economic recovery, and help level up our regions.”

Conservative Party co-chairman Oliver Dowden dismissed Labour’s plans for the economy. “Successive Labour leaders have threatened businesses with tax hikes, higher bills and more red tape,” he said. “Only the Conservatives can be trusted to support our businesses and help our economy thrive as we build back better.”

Image: PA

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