Business 'wants to pay more tax'

13 April 2012

Business groups have reacted furiously to suggestions they are prepared to pay a new "local tax".

The move could form part of a radical shake-up of local government funding after years of inflation-busting council tax rises.

But business lobby groups attacked the proposals, slammed by one group as "the last thing that our members need."

The new "local tax" is being considered by Sir Michael Lyons, the man charged by the Government with solving the headache of local government funding.

In an interview with the Financial Times, he said businesses were prepared to consider paying "a supplementary local tax" if they had a say on how it was spent.

He admitted that "no one wants to put their hands up for paying more taxes", but said bosses would get involved in how the money was spent.

But the Federation of Small Businesses said yesterday that news of another huge bill for its members was unwelcome and unnecessary.

Stephen Alambritis from the FSB said: "It is a stealth tax. It is just A.N. Other tax for businesses to pay.

"I think that it would be wholly unwise to introduce another tax at a time when it is tough out there already."

At present, firms are charged business rates, which are paid by all companies depending on the size and location of their office or premises. Since 1990, business rates - similar to council tax paid by all households - have been set nationally.

It was rumoured that the Lyons review would call for business rates to be set locally, not nationally, but this was rejected yesterday.

In a welcome move, Sir Michael said: "The business rate cannot possibly be the solution to this - it cannot generate the sort of money needed."

But lobby groups warned that the idea of a new local tax being introduced on top of business rates will be strongly resisted by many firms.

Since 1997, business rates have only gone up with inflation but other costs have soared which is piling pressure onto hard-pressed businessmen.

Firms have paid more than £50 billion in extra business taxation since Labour came to power, according to the CBI.

A spokesman for the Forum of Private Business said: "When you open the door with a new tax, you leave it open for further new taxes in the future.

"It is the last thing that our members need with the extra regulation that they have and the burdens of new employment laws.

"The one thing that we want to see is businesses paying the bill for council tax payers."

Cash-strapped councils could decide to milk local businesses rather than try to impose another round of inflation-busting council tax rises.

Businesses fear many councils would seize the opportunity to get money from the tax as an easier, less politically sensitive way of making more money.

Mr Alambritis said: "You have to remember that council tax payers have votes. Businesses do not."

Since Labour came to power in 1997, average council tax bills have nearly doubled to more than £1,250 today.

A spokesman for Sir Michael Lyons said the supplementary local tax is a possibility. He said: "We are looking at a whole range of additional options."

The final Lyons report, which was comissioned by the Chancellor and deputy prime minister in 2004, is expected to be published in December.

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