A Taxing Problem: Reforming business rates in England

5 A taxing problem At the heart of dysfunctional local government finance sits the business rates tax regime and the business rates retention system (BRRS – the mechanism by which business rates are distributed to fund local services). [...] After several delays relating to the Covid-19 pandemic, the latest revaluation based on values as of 1 April 2021 came into force on 1 April 2023.15 The multipliers are adjusted each year in line with inflation (CPI), although in the aftermath of the Covid-19 pandemic, the government froze the multipliers for four consecutive years.16 If the rateable value of the property is more than £51,000, the. [...] However, it allows authorities to retain a proportion (up to 50% under the current system) of the growth in their business rates, meaning that a small number of councils gain from runaway growth in business rates income at the expense of most local authorities. [...] We propose to advance the fiscal devolution agenda with this proposal as all taxes on business buildings are retained by the relevant authority, but the revenue from the land value share of the tax is redistributed according to need (taking into account the ability to raise revenue from both council tax and business properties). [...] 31 A taxing problem Our proposal for a two-rate land and property tax would yield the following benefits compared to the government’s current business rates system: A fairer distribution: Under NEF’s proposals, overall tax levels would fall in all regions outside of London and the south-east (before the removal of empty property relief for landowners).