Once again, business rates are a tax upon landlords
We gawp with amazement at the argument here:
John Lewis has warned the Chancellor that a tax raid on retailers in the Budget would trigger a wave of catastrophic closures on the high street.
Jason Tarry, the chairman of John Lewis and Waitrose, said a tax raid on department stores and supermarkets by John Healey would “only harm our high streets” and threaten to prompt closures.
Mr Tarry said concern was mounting among major retailers that Andy Burnham will fund his promise to cut business rates for pubs and music venues by “piling more costs” on to large stores with a so-called “warehouse tax”.
Writing in The Telegraph, Mr Tarry mounted an unusually outspoken attack on the potential Budget raid, warning that it “would reveal a fundamental misunderstanding of how modern high streets work”.
The Prime Minister has signalled Labour will ramp up a tax on warehouses to help fund a tax cut for “businesses that bring social benefit”, such as pubs and restaurants.
Getting the basics right is essential to being able to devise a plan. This entire argument is based upon the idea that it is the High St businesses that pay the tax called business rates. True, they hand over the cheque but the tax is not incident upon those operating businesses. The wallet that gets lighter as a result of the tax belongs to the landlord of the property, not the tenant. The existence of the tax makes no difference, over time, to the amount that the operating business has to pay in order to be able to operate on the High St or, indeed, anywhere else. Business rates are the State taking a slice of the landlord’s income, not the operating businesses’.
Thus deciding to favour pubs, or small shops, with lower business rates isn’t just playing favourites. It’s actually an irrelevance to the aim - trying to play favourites with certain business sectors. A cut in business rates benefits the landlords of pubs and shops, not the users or tenants of.
That is, the argument of whether we should punish warehouse users, or large shops, or benefit pubs or local shops is wholly a mistake completely orthogonal to the real world effects.
It is, we suppose, vaguely possible that it would be just and righteous for government to favour the landlords of small shops over those of large but we do also have real difficulties in constructing that argument.
They’re all off arguing, then making policy, about something where the most basic understanding of the subject under discussion is missing. Our Word, how very unlike government that is.
To repeat, fiddling with business rates benefits/harms landlords not tenants or operating businesses. The entire discussion and plan is based upon simple ignorance of this basic fact. Joy.
Tim Worstall