WELSH BUSINESS FACES MASSIVE TAX RISES

Could anyone believe that politicians, during the middle of the worst recession since the Second World War, would have the audacity to impose a tax increase on businesses across Wales?

Yet, it would seem this is what has happened over the past couple of weeks, as 100,000 Welsh businesses have received notification from the Valuation Office Agency, an executive agency of HM Revenue & Customs, of the new rateable value of their business property.

As a result of this change, many will be facing crippling increases in their business rates bills at a time when they can least afford it. This is because, every five years, the VOA carries out a revaluation of all rateable values in England and Wales, and the next one is due to come into effect on April 1, 2010.

While this year’s business rates are based on valuations of 2003 property prices, business rates for next year will be based on an assessment of property values on April 1, 2008, and, as we all know, there was a boom in property prices over this five-year period.

This is compounded by the fact that during the past two years, the UK has suffered the worst slump in commercial property prices since records began.

Therefore, not only will the new higher business rate bills not reflect the value of the property, the business owner will now have to pay higher rates on a valuation that, in some cases, is based on a value that is around 50% higher than what the property is currently worth.

Of course, this has not stopped the Government from pushing ahead with its plans for revaluation during the current economic slump, despite the fact that business rates are the worst sort of tax during a recession.

This is because, unlike other forms of taxation on firms, business rates remain the same regardless of the performance of the business, as it is based on the property occupied by the business and not on turnover or profitability.

When the revaluation exercise started, the VOA made the case that “the revaluation would not raise extra business rates and was designed to redistribute the same total amount among ratepayers”.

To check the veracity of this statement, I examined two typical shopping streets in North and South Wales to see whether business rates, as the VOA claimed, had been redistributed.

The results, dare I say it, did not support their case at all.

On Cowbridge Road East, Cardiff, only one business along Canton’s main shopping street will not be facing a bigger business rates bill in April 2010. The rest will be facing an average increase of around £1,520, or a 23 per cent rise on this year.

A similar situation was found in North Wales where businesses based on Mostyn Street, Llandudno’s main shopping area, will be paying, on average, an extra 15 per cent on their business rates next year, which equates to more than half-a-million pounds in additional revenue for the Government.

Therefore, there seems to be little evidence of any redistribution within some of the main shopping streets in our towns and cities.

So could this differ in the poorer areas, especially when an Assembly Government spokeswomen pointed out that businesses in generally less affluent areas will have rental values that have dropped and, as a result, will be helped by a reduction in their rates bill?

If that is true, how come more than 80 per cent of the businesses on the High Street in Merthyr will face an average increase of 16 per cent in their rates bill?

How is it the case that, on the West Parade in Rhyl, in the most deprived community in Wales, only two businesses are receiving a cut in their business rates?

Given what the VOA and the Assembly Government has stated publicly, there must be some “redistribution” somewhere but I cannot for the life of me find any real evidence of it in Wales. Indeed, it would seem that the vast majority of Welsh businesses will be facing a rise in their bills next year. If that is the case, then is this yet another stealth tax on business when they can least afford it?

And it is not only small businesses that will suffer.

Corus will have recently received notice of an increase in its rates bill of £3.5 million for the steelworks at Port Talbot and Llanwern, while Airbus at Broughton faces a £250,000 increase in business rates for its aircraft plant.

So when WAG announced that the Pro-Act scheme was giving Corus a grant of £1.1 million pounds (even though the company didn't qualify), did they know that the rates would then by going up by over three times that amount

So what can be done?

Apart from the Daily Post, the Western Mail, BBC and HTV have completely ignored the biggest rise in taxes that businesses in Wales have faced in years.

Therefore, in my opinion, business groups like the IOD, CBI, FSB and Chambers of Commerce need to lobby the Welsh Assembly now to put this at the top of the agenda of the next economic summit to ensure that the implementation of any revaluation is postponed indefinitely.

The One-Wales Government is burying its head in the sand over this issue, as seen by Rhodri Morgan' s performance on Tuesday at Plenary where he was totally clueless about what was going on.

Thanks to Plaid's broken promises to take 50,000 firms out of business rates altogether, many of those will now be facing additional tax bills as a result of thie re-evaluation. How do they explain that to the local butcher's in Aberystwyth, the pub landlord in Holyhead and the shopkeeper in Llandudno?

Clearly, things are not going to change because Ieuan Wyn Jones said in the economy debate on Tuesday that "We are not persuaded currently that it (business rate relief) is the best use of the limited resources that we have. We still think that they are best used for things like ProAct and ReAct".

I would therefore urge each and every one of the 100,000 business ratepayers in Wales to urgently check their new rates bill on www.businesslink.gov.uk/estimatemyrates and, if it has gone up, to write and let their local AM know that any tax rise on any business is completely unacceptable during an economic downturn.

Business has always been an easy target for governments wishing to raise money, but this is a step too far during the worst trading conditions in a generation.

If the tax bill for one small part of Wales - Mostyn Street - has seen its overall tax bill go up by half a million pounds, then the overall tax bill across the country must be running into tens, if not hundreds, of millions of pounds of extra to be paid by business.

Therefore, if the new valuation of business property is implemented, then thousands of firms will face a crippling bill next year. That will not only knock back the confidence of businesses across the land, but it will be a disaster for the Welsh economy and, more significantly, will hold back any recovery from the current recession.