Tesco tax as a health levy is a wolf in sheep’s clothing

Leading business rates adviser Gerald Eve has blasted the Scottish Government’s plans for last year’s ‘Tesco Tax’ to return in the guise of a new ‘health’ levy.

Last year a proposal to impose an additional business rates levy on Scottish retailers with assessments greater than a Rateable Value (RV) of £750,000 was rejected by Scottish MSPs, partly due to the fears for its impact on jobs.

During the summer despite the Scottish Parliament election which gave the SNP a majority, the Executive confirmed that it would not be bringing back plans for a rates levy on large shops. But this week it announced a very similar sounding tax rebranded as a supplement on larger retailers, affecting only those selling alcohol and tobacco to assist addressing “the health and social problems associated with alcohol and tobacco use.”

This new ‘health’ levy will come into effect on 1 April 2012 and is expected to raise £30m in its first year and £40m per annum subsequently.

Business rates expert Ken Thurtell who is senior partner in Gerald Eve’s Glasgow office said: “Despite the social concern rhetoric this is a very similar tax to that which was previously rejected because of its grave likely impact on the economy. This new proposal is a wolf in sheep’s clothing, a tax on retailers masquerading as an attack on drinking and smoking. It is clearly now focussed on the supermarket sector but a far greater number of properties will be affected as the threshold at which the levy will be payable is to be set at a rateable value of £300,000.  As a result of this lower RV threshold it is possible that properties other than supermarkets which also sell tobacco and alcohol could be affected.”

At this stage it is not known whether the levy will be a flat one or whether it will be on a banded basis along the lines of the previous proposals, under which the Uniform Business Rate supplement was to have varied from 2.5p to 15p per £ RV depending on a property’s RV.

Thurtell added: “There are presently 153 supermarkets and superstores in Scotland with assessments above £300,000. Presently they pay £75m per annum in business rates and if their liabilities are to increase by £40m by 2013 this represents a staggering 54% hike in their bills. That sort of increase surely cannot be accommodated without an adverse impact on prices, jobs and the prospects for further investment in the Scottish economy by the key retailers being targeted.

“These proposals and the equally misguided proposals to reduce empty property rates relief will and should be fiercely opposed.” Thurtell said. “However given that the SNP now has a majority in Parliament I think Scotland Plc faces a much tougher fight this time round.”