A large retail levy will not have an adverse affect and the benefit for small businesses is good value for money
One of the biggest, single overheads for a small business is their 'non domestic rates'. The Assembly is about to consider proposals that could bring relief to thousands of such businesses across the province.
Business rates are often the cause of micro businesses folding, or other aspiring entrepreneurs deciding not even to start their business or to take on premises. The Federation of Small Businesses regularly surveys its 8,000-strong Northern Ireland membership and the evidence gathered reveals that, in many cases, a small business's rates bill can be nearly as high as its rent.
Because of this, the FSB lobbied hard at Stormont, campaigning for the introduction of a Small Business Rates Relief scheme (SBRR). Our local politicians responded favourably and SBRR was introduced for Northern Ireland in April 2010. This was a good example of devolved powers delivering for the business community that is so vital to our future prosperity. To date, this initiative has been worth a total of almost £7m to 16,000 small firms, yet rates remain a major barrier to growth. Again, responding to lobbying and advice from the FSB, the relief system was introduced so that it is applied 'at source', meaning that businesses don't have to fill forms or waste time applying for rebates or refunds.
Having accepted that this is an effective way of assisting local businesses, the FSB continued to press for the relief to be extended, estimating that this could assist up to 9,000 more businesses, and double the savings. When we asked our members for information on how they would invest any extra money made available from a reduction in business taxes (including rates), over half said they would invest to innovate and grow and 41% said they would increase capital investment in their business. This is exactly what our local economy needs if it is to grow.
Our MLAs are keen to respond but, as we know, budgets at the Assembly are already stretched, with numerous demands for additional resources giving the Executive very little financial room to manoeuvre. Thus, the Finance Minister and his Department have developed an imaginative solution to share the burden within the commercial sector, which will see the largest retail stores having to pay an increased levy which will be directly passed to another cohort of small businesses in the form of an 'at source' SBRR, taking the number of small businesses benefiting from the relief to 25,000.
To be clear, what is being proposed is a short term measure to last for three years from next April, which will see the rates bill for the 77 largest retail premises in Northern Ireland increasing by around £85,000 per store. All of the funds raised from this initiative will be transferred as automatic discounts to the rates bills of a large, additional group of small businesses, to be determined by their Net Annual Valuation rather than their sector; in other words it will benefit a wide range of small businesses, not just those involved in retail. In financial terms, this measure will have the effect of seeing several million pounds retained in the local economy which would otherwise have left as profits for the vast majority of those 77 businesses that are not incorporated in Northern Ireland.
Naturally, some of the larger retailers have voiced their objection to this proposal - after all no-one likes an increase in their tax bill. The FSB did not lobby to increase taxes or rates for any of the big stores but, in the face of budget restrictions at Stormont, this proposed measure will deliver beneficial change for which we have been lobbying tirelessly to help our small, indigenous businesses and is to be warmly welcomed by the thousands of small businesses and their employees who will benefit.
We are not unsympathetic to the views of the large retailers but another lobbying campaign where the FSB has been in the vanguard will, if successful, see them derive substantially greater benefits than the cost of their increased rates. The FSB has lobbied vigorously to see powers devolved that will give the Assembly the ability to set the rate of corporation tax. A majority of our members support this - not because they will benefit personally but because they recognise that it is the right thing to do for the local economy. If this power is devolved, and the corporation tax rate is reduced to compete with that in the Republic of Ireland, the large retailers will save millions on their tax bills.
In the meantime, the corporation tax rate in the UK is being reduced every year, from 26% in 2010 to 23% in 2014, which more than offsets the additional rates payable by most of the 77 stores affected by the measure. We therefore believe that a large retail levy will not have a significant or adverse impact on the sector, nor on potential investors, and that the benefit to small businesses, both financially and in terms of confidence levels, is good value for money.
Wilfred Mitchell is the police chair of the Federation of Small Businesses