Isn't this just fascinating?

intu.jpg

Just so surprising who it is that is complaining about business rates:

The archaic business rates system is putting off international companies from coming to Britain, the boss of the UK’s biggest shopping centre owner has argued. David Fischel, chief executive of Intu, has told the Telegraph that the business rates system is “absolutely putting off international retailers from coming to the UK”.

Actually, no, not surprising at all. Intu is a real estate investment trust. Essentially, it owns commercial property and pays out the income to investors. Given this structure it is those investors who actually bear the economic burden of business rates in lower payments from the company. Business rates are not perfect, the tax should be levied on the value of the undeveloped land plus whatever permissions there are to do something with that land, rather than the value of what is built upon it. But even so, they're still a close approximation to a land value tax and as such a pretty good tax. And they're incident upon the landlord, which is where such taxes should be incident.

So, there isn't actually all that much surprise: Mr. Fischel's call is "Don't tax my people, tax some other bugger".

Spanish fashion group Inditex has been introducing more of its brands to the UK market, such as Pull & Bear and Stradivarius, but the Zara owner is said to be looking carefully at its investment return, with business rates a rising cost.

Zara tends not to own property, but to lease it. Thus rates are not incident upon Zara, but upon the landlords from whom it leases. We can indeed prove this too: when business rates were reduced in Enterprise Zones rents went up to compensate. Or rather, as is the way of such things, currently rents are depressed by the tax take of those business rates. Which is, again, precisely where we would like the incidence of the tax to be.

Mr Fischel called the rates system “a monster – in essence it’s an inflation-linked Government bond attached to our property assets”.

Yes, yes, it is. And that's what it's supposed to be too. It's one of the few pieces of the tax system which actually does exactly what it says upon the tin. We must get our tax revenues from somewhere and land value taxation is the least distorting manner of doing so. Thus why we do, and should, tax in this manner. The rents being received by the shareholders in Intu are exactly what we are trying to tax. And they are also what we are taxing. Sure, obviously, it is Mr. Fischel's job to complain about this but that doesn't mean we should pay him any mind as he does so.