Member Article

The ‘Tesco Tax’ and the dangers of policy by public opinion

Alliteration is a powerful tool. A proposal to impose a levy on business rates of up to 8.5% on certain commercial property with a rateable annual value of not less than £500K is not going to get the pulse racing (indeed I got bored just typing it). Christen it the ‘Tesco Tax’ and suddenly it is front page news!

So what is this all about? Under the Sustainable Communities Act 2007 local residents can put suggestions to their local authorities about ways to remove legislative or other barriers that prevent them from improving the economic, social and environmental well-being of their area. There is then a process under which ideas can be filtered at local level before being put to national government for consideration. This particular idea has its roots in similar provisions in Northern Ireland and Scotland. It has been taken up by a number of local authorities and will undoubtedly be put to the UK government. Initial signs are that the proposal will not find favour in Whitehall because of concerns that it would be passed on to customers and therefore hit the poorest families hard.

What interests me is not so much the detail of the proposal but the fact that there is now a formal mechanism in the UK for individuals to put forward tax-related proposals to government. Is this grass roots democracy in action or is it more akin to taxation by public opinion? The many high-profile tax stories in the media over the last couple of years have had huge traction with the public and are we in danger of getting to a position where tax policy is driven by what plays well in the media rather than on sound fiscal and economic arguments?

Perhaps I am making too much of a catchy headline (it could have been worse – how about a Lidl Levy or a Sainsburys Surcharge!) but this does need watching carefully. Short-term decisions based on public outrage nearly always backfire.

Andrew Hubbard is Tax Partner at Baker Tilly

This was posted in Bdaily's Members' News section by Baker Tilly .