Monday 29 October 2012

They own land! Give them money!

Spotted by Robin Smith in The Telegraph:

Business rates are the third biggest outgoing for local firms after rent and staff costs*. As a very direct and visible tax demand, unsurprisingly, such bills aren’t that popular with business...

The engines of economic growth aren’t found in the corridors of Whitehall but in the foundries of great local British companies. The best thing Government can do to help such businesses is to provide them with a stable economic environment. This is why we want to protect local firms from soaring tax bills.


* The article was written by Brandon Lewis MP, Minister for Local Government, so true to his calling he starts off with a Big Fat Lie. The biggest costs on businesses are PAYE (£234 bn), VAT (£102 bn) and corporation tax (£37 bn). Business Rates are a mere £26 bn. Anybody with five minutes to spare can look this up in the Public Sector Finances Databank.

Rents (actual cash rents, mortgage repayments or the cost of capital tied up in land ownership) must be two or three times as much as much as Business Rates, i.e. about £65 bn.

You can make up your own mind whether wages and salaries are really a cost to the business at all - as far as I can see, a business is a joint venture undertaken by owners and employees, the bit which the owners get is called 'profit' and the bit the employees get is called 'wages' but really it is the same thing (we don't consider 'profit' to be a cost to a business, do we?), but for the sake of this discussion, let's pencil in wages (net of PAYE) of another £400 billion a year.

So, glossing over the point that all that happens when you cut Business Rates is that rents go up - the people calling for reductions in Business Rates are the usual suspects - and businesses do not benefit one iota, what he really means to say is "Business Rates are the sixth largest outgoing for local firms after staff costs, PAYE, VAT, corporation tax and rents."

5 comments:

Kj said...

The biggest costs on businesses are PAYE (£234 bn), VAT (£102 bn) and corporation tax (£37 bn).

NI in here somewhere?

Mark Wadsworth said...

Kj, it's all tax on wages, isn't it? You can split up PAYE into £134 bn income tax and £100 bn NI if you wish, but I don't see the point.

Anonymous said...

MW: "(we don't consider 'profit' to be a cost to a business, do we?)"

Yes, normal profits are indeed a cost.

Mark Wadsworth said...

RA, it's a philosphical point. The wages are a cost to the owner (and therefore, the profits msut be a cost to the employees).

But either both profits and wages are a cost to the totality of the business or neither are.

Bayard said...

"The article was written by Brandon Lewis MP, Minister for Local Government"

so he would probably argue that PAYE is a staff cost.