Labour should re-set rates to make a real stand against “business as usual”

Labour leaders are increasingly getting criticism from the left of the party for being a little too close to big business and the City. Despite Miliband’s repeated claims to be against “predator capitalism”, and offering tax breaks to all firms paying the living wage to their employees, perhaps it’s time for the Opposition to remember its leader’s promise? If Labour is to offer a real alternative to the other parties, some radical ideas are essential.

There is clearly an opportunity opening in relation to the rates paid by businesses to the local councils. After all, what if the firm to be offered the tax break is actually well known for its avoidance of corporation tax?

With business rates currently “calculated via a complicated formula”, and leading industry figures “demanding sweeping reforms”, it seems an ideal moment for Labour to suggest the introduction of different rates for different types of business. This could be utilised as a weapon in the war against “irresponsible” capitalism. The 2015 Labour government could legislate to allow councils to impose different bands of the tax, similar to the council tax system, but with councils working in cahoots with HMRC and the government. For example, rates could be lowered for the companies that pay both the correct amount of corporation tax to the Treasury, and the living wage, at least, to all of their employees.

For the many businesses that refuse to pay either the living wage or their fair share of corporation tax, despite enjoying all the benefits tax brings to the local communities and to their employees, why not ensure the business rates they are forced to pay are sky-high? This could include the multi-nationals which claim exemption from most of the country`s taxes because they assert their businesses are not based here. If, as in Amazon’s case, the rates for massive warehouses went into the multi-millions, some justice could be done, in view of the fact that in the tax year 2013-14 it paid £4.2m in tax, despite UK sales reaching £4.3bn. But there are plenty of others to which the same principle can be applied, all reaping the benefits of this country’s security, transport and education services but refusing to accept responsibility for their retention.

There is a tax gap of at least £35bn every year, due to companies and individuals avoiding tax – and some tax experts like Richard Murphy reckon this figure is much higher. With the NHS in dire need of extra resources, and some companies clearly intent on paying as little as possible to the Treasury, some drastic and radical measures are needed. A change to the calculation of business rates is worthy of discussion, especially as election manifestos are yet to be finalised.

Business rate calculation could even include the nature of the business itself. There is, for instance, a strong case for deterring betting shops and payday lenders that are invading of our high streets. In poorer districts, especially, a large increase in the business rate for such firms could act as a much needed hindrance to their expansion.

Labour insists that whilst it is not anti-business, it does not support “business-as-usual”. A radical change to the setting of the business rate could be a method of initiating a genuine culture-change in the business sector.