Independent studies show the UK has amongst the highest levels of property taxes of all developed economies - and the highest amongst OECD nations. For most businesses, business rates represent the highest rate of corporate tax they pay in the UK. For most international businesses, business rates in the UK represent the highest level of property tax that they encounter anywhere in the world. Consequently, they are subject to close scrutiny in the UK.
The response also highlighted the incongruity of taxing empty properties, known as Empty Property Rate (EPR). Since 2008, this has been set at 100% of the occupied rate. The RICS doesn’t suggest that EPR should be abolished altogether, as some services, such as fire and police, may still be required, but suggests restoring the rate to its previous level of 50% and allowing a rate free ‘void’ period of six months to reflect some of the time needed to let the property.
There is no evidence that EPR encourages use and occupation of property; moreover, supply of property stock is likely to have been hampered because of the increased property holding costs during necessary redevelopment and refurbishment works.
The consultation posed a series of questions around obliging ratepayers to provide notification of a change in their circumstances, the period of time allowed to provide these details, and a civil penalty where the ratepayer has failed to notify or provided false information or withheld information. In response, RICS Wales pointed out that:
- Local Authorities (LAs) already have access to most of this information, through planning and building application processes, for example, and effective communication between LAs and the Valuation Office Agency (VOA) would negate the need for ratepayers to provide the same information twice
- It was anticipated that ratepayers would experience genuine difficulty in understanding what constitutes a material change in circumstances
- The 21 day response period would not represent sufficient time to provide what may be complex, detailed information to the LA
- There would also be difficulty for LAs to decide whether information had been knowingly withheld or falsely provided, and questioned whether they would have the resources available to enter disputes over provision of information
- While the £200 penalty seems reasonable, particularly if information is provided fraudulently, it should be subject to a right of appeal to the Valuation Tribunal Wales (VTW).
To the proposal that LAs should publish a list of properties that attract mandatory and discretionary reliefs, the RICS observed that:
- It could compromise commercial confidentiality
- It may offend data protection requirements.
Key issues that would need to be considered in putting in place a General Anti-Avoidance Rule (GAAR) for non-domestic rates in Wales would be:
- It would need to have due regard to legal and case law precedents
- An appeal process to the VTW.
In concluding, RICS Wales said that while it supports measures to reduce fraud, a clear distinction needs to be drawn between legal avoidance and illegal evasion, which may be tested in court. Taxpayers have the right to legitimately organise their affairs so as to minimise their tax liability.