A copy of this article first appeared on the Insider.co.uk website on Friday 21 July 2017.
By Moira Kelly, Chair - CIOT Scottish Technical Committee
In a few weeks’ time, the much-vaunted Barclay Review of Business Rates is expected to report to Scottish Ministers.
By the time it’s published, Ken Barclay and his team will have waded through almost 18 months of written and verbal evidence from a range of groups across Scotland and beyond.
Its recommendations – whether big or small, radical or piecemeal – have the potential to usher in major changes to the way that we tax businesses in Scotland.
Of course, you could argue that Mr Barclay’s review merely serves as the starting gun on the real debate, as the ultimate decision for replacing the present system rests with Scottish Ministers and – ultimately – the Scottish Parliament.
With no one party having an overall majority, and the government’s somewhat cautious response to some of the bolder recommendations of 2015’s Commission on Local Tax Reform, you get the impression that the scene is being set for some challenging and contentious debate.
As tax professionals, our priority is seeing a review that delivers on the fundamentals vital to the operation of a good tax system.
Whatever Mr Barclay and his team propose, the following principles will strengthen the case for change.
Certainty – The current system has been beset by infrequent valuations and on the hoof reactions to rate increases. A clear timetable for reviewing and updating liabilities and reliefs may help businesses plan for the future with greater certainty.
Proportionality – Reforms should recognise that businesses face other tax burdens (such as VAT, National Insurance and corporation tax). There is a loose link between ability to pay and the current system in the form of property values. However, if the system is reformed and based on other criteria (such as turnover) or a mix, then it would be helpful if wider liabilities, exemptions and discounts were taken account of in determining what is a fair and balanced result overall.
Convenience – Any replacement should be simple to understand and easy to engage with. That goes for paying what is owed as well as understanding the reliefs and exemptions that are available.
Efficiency – Any new system needs to be simple to administer and easy to understand. What role might a body like Revenue Scotland play as a ‘one-stop shop’ for administration and collection?
Accountability – But what would be the cost to accountability of such a move? Ultimately, politicians and the public will want to know who is responsible for setting and spending the money raised. The current regime is a bit of a melting pot of organisations – assessors, councils and national government. That makes it harder to understand who is responsible for what.
Clarity – Taxpayers need to understand what they are going to be asked to pay, when they will have to pay and how it differs from its predecessor. There will undoubtedly be winners and losers in the process. They will need to understand the rationale for change and weigh the pros and cons of what is being proposed. Meaningful consultation and engagement will be essential for overcoming challenges, ironing out concerns and accepting change.
So when Ken Barclay and his team report, while most of those who pay business rates will understandably jump straight to the bottom line to work out how much better or worse off they would be, those with a broader interest in an enduring system of business taxation, commanding lasting public support, should take a step back, remember the principles above, and judge the proposals on whether they deliver on them.