President of the Confederation of British Industry (CBI), John Allan, has called for an independent review of the Business Rates system. Calling is an ‘uneconomical, unsustainable and unintelligible’ regime, he claims it is a ‘broken system’. Thousands of businesses appeal their rates demands every year.

Allan has suggested that the current rates system is worsening the current high street crisis, and that it significantly influenced the recent demise of Debenhams.

Set up in 1988, the business rates system has long been criticised by business owners and industry leaders. MPs on the Treasury Select Committee are currently reviewing the impact of the scheme and considering alternatives. The current scheme generates in excess of £30billion every year.

Kate Nicholls, Chief Executive of UK Hospitality highlighted the disparity between levels of rates due and actually business activity within her industry. Currently hospitality companies pay 11% of the business rates generated, but account for just 2.5% of all business activity.

It is this disparity that has resulted in the calls for an alternate system. Tescos, also chaired by John Allan, has suggested that a 2% online sales tax should be levied, to subsidise the rates currently paid by high street retailers. In comparison, Boots have suggested a levy based on turnover, which could be collected in a similar way to VAT.

The CBI report calls for immediate changes, with the long term goal of a review to be the development of a fair and effective model.

You can find out more about the CBI report here.