Partner Article

Tax is damaging our ability to grow again

I HAVE reported on many occasions that the Empty Property Rates tax is damaging to the North East economy. The Royal Institution of Chartered Surveyors (RICS) this week publishes a new survey that illustrates the impact of this unwarranted levy.

In short, 89% of respondents – mainly chartered surveyors – believe EPR restricts economic growth and 92% view EPR as a barrier to town centre regeneration.

Empty rates are levied where a property is vacant. Retail shops have a holiday from the levy for three months and offices and factories for six months.

The tax was imposed in 2006/07 with the claim that properties were deliberately being kept empty and was an incentive for landlords to let the space or be penalised for not doing so.

I co-authored a report for former regional development agency One North East that showed there was no evidence landlords were deliberately keeping property empty and that the impact of the tax was to take £32.5m out of the region in 2006/07 before rising in 2009/10 to an estimate of £35m.

The recession has had a much greater impact, and now I think that this was underestimated and is close to £100m. I believe that the Treasury now acknowledges that this is in fact a tax that bolsters the Government’s income. But it is a tax that is significantly damaging the efforts being made to achieve economic growth and jobs in the region.

The RICS survey is a national call for changes to help boost the construction and property sectors to create growth and jobs. We want to:

Exempt new-build property from the payment of empty rates for 12 months.

Increase the exemption for empty existing retail property from three to six months.

Increase the exemption for empty existing office and factory property from six to 12 months.

See all refurbishment, renovation or retrofitting projects removed from the business rate list until completion.

Increase the threshold for Empty Property Relief to between £12,000 and £18,000.

Devolve EPR relief allocation to Local Authorities and Local Enterprise Partnerships as part of the localisation of business rates.

RICS does not support an overall sliding scale of empty property rates.

The practical position is that the imposition of an empty property rate adds significantly to the risk of developing property in a period where demand for space is low.

No one will develop nor finance the development of property without an occupier ready, willing and able to commit to take the space.

Even as the economy improves and demand increases, there is a significant disincentive to develop while the tax is imposed.

It is also ridiculous to find that the Government takes such a large sum out of the local economy to then be forced to give equally significant amounts to help to kick-start the regional economy to achieve growth and create jobs.

I am not a supporter of the removal of empty rates in the entirety, because it does put pressure on landlords to be realistic about the rents and other terms offered to attract tenants.

I am, however, a great supporter of the market operating more freely without unnecessary intervention, linked with the ability of local decisions to forge our destiny.

This was posted in Bdaily's Members' News section by Kevan Carrick .