Friday 14 January 2011

The 'Tesco Tax'

Much hullaballoo, flim-flam and fuss has been occasioned by John Swinney's reasonable proposal to ask businesses with a rateable value in excess of £35,000 to pay a little more in their rates.  It has been dubbed the Tesco Tax by some so I'll adopt that heuristic just for the sake of sweetness and light.  Some would have you believe that this policy will bring economic devastation to Scotland, that retailers will leave in droves, that the chill winds of fair taxation having blown round the skirts of frightened supermarkets will echo forevermore through abandoned shopping centres and out-of-town mammon factories, even that it is (careful now) anti-Glasgow; the greatest sin of all.

We're told that supermarkets, shopping centres and large retailers in general will up sticks and leave (no-one seems willing to mention the businesses which will be affected which are not in retail, but hey-ho).  This position is, of course, quite frankly daft; retailers will open where their customers are - it's kind of how they operate, there's no point in having a shop where no-one shops and large retailers are always looking for untapped markets to slide into.  But others have written about that and you should read their wise words - I particularly savoured the bit in Lesley Riddoch's piece that noted "Scotland has more supermarket floor space per head of the population than anywhere in Britain and probably Europe" - for my part I think I'll look at the proposal which has caused so much supermarket angst.

It's a proposal to add 0.7% onto the poundage rate of larger businesses.  "Why 0.7%?" you might ask - and that would lead us to a very interesting point.  The SNP Scottish Government has committed to keeping the poundage rate in Scotland at or below the rate in England for the lifetime of this Parliament; the non-domestic rate poundage in Scotland is 40.7p in the pound (40.7% of your rateable value is your rates bill), the poundage rate in England is 40.7p for small businesses and 41.4p for standard businesses so the small rise in Scotland for very large businesses will bring the rate into line with the standard rate charged in England.  Our medium-sized businesses will continue to be better off and our small businesses (with the small business bonus) will continue to be much better off.  Why, exactly, would this equalisation of the rates for large businesses north and south of the Rio Tweed result in a desperate caravan of refugee supermarkets trudging wearily south?

If you think that proves the case, I've got a little more icing for the cake.  London charges higher rates.  London charges an extra 0.4p on each rate - 41.8p on the standard rate and 41.1p on the small business rate (you'll find the figures at the bottom of the VOA multipliers page) small businesses in London pay higher rates than large businesses in Scotland.

I think it begs a question - if London charges more in rates on most businesses than Scotland does and substantially more on small businesses and the rest of England also charges more but still less than London then why, using the logic of those predicting doom for Scotland under John Swinney's proposal, is business not flocking out of London into the rest of England and flooding from England into Scotland?  The truth is, of course, that non-domestic rates, the poundage and the actual cost per trading unit, are only some of the considerations that businesses make in determining where to set up - many, many others apply.  Indeed, non-domestic rates are a very small consideration for very large retailers.  They will squeal about any increase in taxation, any additional regulation, any requirement put upon them to act like a responsible part of society (although they will not hesitate to call on the services which they are so reluctant to contribute to - roads to ease deliveries and customer access, police to protect their properties, street lighting to make their premises more appealing to customers, cleansing and so on) but they will stay in situ so long as it is commercially advantageous for them to do so.  Large retailers are not overly burdened by a great weight imposed by non-domestic rates, they truly are not.

Small businesses face rates which are a far larger percentage of their turnover, a far greater burden for them to carry, and that's why the SNP Scottish Government introduced the Small Business Bonus.  To be absolutely fair to those in Whitehall, there is some rates relief for small businesses in England but it is, if I may utilise the vernacular, piss-poor.

Far from the proposal to ask large businesses to pay an extra seven tenths of a penny more in rates being one which will see economic destruction in Scotland, the idea is almost akin to progressive taxation.  Those large retailers and other businesses with business premises with rateable values over £35,000 will pay a little extra (just taking them up to what they would have been paying had they been in England) to help fund the services they use while small businesses get a little help to survive and thrive - helping to grow the economy.  Add in the fact that the SNP Scottish Government has frozen Council Tax year on year, making sure that people have some money left in their pockets to spend in the large retailers as well as other places, and you might have thought that the retailers would be keen to welcome the actions of the Scottish Government - good for people, good for business and good for jobs.

It's almost like there's an election coming, isn't it?


Anonymous said...

Prove to me that I need to pay tax.

Tax is what gangsters do.

Anonymous said...

Waitrose to open 16 stores across Scotland in next five years...

Don't seem that bothered about the rates, do they?

Anonymous said...

The >£35,000 premium has been in place for yolks. The last lot brought it in. The Tesco Tax is solely on retail properties over £750,000 and goes up as high as 15% of the poundage above £2,100,000 rated properties.

Anonymous said...

If Anonymous doesn't want to pay tax then they can do without roads, rail or buses, all paid for or supported by taxes. That should include anything delivered by those means unless the pay for all such thoroughfares themselves.

Of course water, sewerage, health services, refuse collection, any public service, if they are happy to pay for it themselves, and not impinge on the publicly funded mainstream service then good on them

Anonymous said...

Mr Cashley, Would you mind if I use information and quote your blog to put my Labour MP right as he is scaremongering people in Fife. His claim in the local press is that this wee bit extra tax will cost jobs and prevent Sainsbury opening a store which is in the pipeline. I don't think so!

I'm pretty sure we will see our new store, I also heard Tesco were to build a new store in Dunfermline, plus Fife has Amazon which our First Minister announced recently.

BTW We are also getting our first council houses in, well I don't know how many years... 20 I think??

Great blog by the way, cheers!


Calum Cashley said...


I'd ask him why he thinks that supermarkets can't afford a few extra pennies but their shelf-stackers can take a massive council tax rise.


Anonymous said...

Hi Calum, I have tried, but he will not answer my email other than offer me an appointment with one of his staff members and the local paper his very picky about the letters.

It's frustrating living in the central belt.

I wish our Scottish Government held regular press conferences to help combat the misleading stories in the press.

Many thanks Gilly