Scotland’s business rates system, which charges non-domestic properties to contribute towards the costs of local services, is placing a higher burden on smaller firms.
Scotland’s business rates system has come under fire following a new research report from Holyrood. The investigation, published by the Scottish Parliament Information Center, concluded that non-domestic rates were significantly higher in the hospitality industries than in any other sectors of the business economy between 2011 and 2014, digit.fyi reported.
The findings come ahead of a review of the business rates system due to be published by the Scottish government later this week.
Earlier this year, a number of companies including Sainsbury’s warned of high street closures after they were told that British-wide rates could force businesses to hike prices as much as 400%. A report earlier this year found that some shops have already faced a rise of 8.75% in rates over the last seven years.
NDR is taken from businesses based on their rateable value (calculated from size and location, for example)–there is no connection between a business’ profitability and how much it pays.
As a result, the report finds that in Scotland the construction industry only paid around 1.4% of its operating surplus to NDR, while the hospitality sectors paid 11.6%, in 2014. Shops, which account for the same share of GVA (total contribution to the economy) as manufacturing, but pay rates of 30.8%, in comparison to 11.1%.
“There is a significant variation of rates as a share of operating surplus across different sectors”, the report claims. “Non-domestic rates as a share of operating surplus is significantly higher in the accommodation and food services sector than any other sector of the economy, particularly construction and manufacturing.”