High Street: Retailers: new tax 'is a disaster'

Retailers have labelled plans to allow local government departments to increase taxes on businesses a "disaster", arguing that it could result in £100m in additional tax charges for retailers every year.

The British Retail Consortium said that the proposal to give shire counties and the Greater London Authority the power to increase the tax on businesses to fund local projects represent "a massive blow" to retailers that are already struggling with tough market conditions and higher rents. It said retailers were already under "enormous financial strain" and an extra levy would contribute to the inflationary pressures that retailers are already finding hard to control. It pointed to a 24 per cent rise in property costs in London over the past four years as evidence of the challenges that retailers are already grappling with.

It argued that public works should be funded from existing revenue and that the proposed tax is open to "widespread abuse" and that retailers could end up funding projects from which they will receive no tangible benefit.

A BRC spokesman the £100m figure was a "conservative" estimate and that the actual figure could prove to be much higher.

Edward Cooke, the head of tax policy at the BRC, said: "Retailers already contribute more than £4.5bn to the public purse each year through business rates alone. It is unreasonable to demand they pay even more to fund projects which should be paid for from existing revenue, particularly as there is no guarantee that they'll receive any benefits in return." He added: "This could become a classic case of taxation without representation."

The latest data from the BRC showed retailers are recovering from a difficult summer with like-for-like sales rising 3 per cent in September, compared with 2.4 per cent in the same period in 2006. Despite the figures showing the highest level of retail growth in three months, the BRC still wants the Bank of England to cut interest rates to boost consumer confidence in the run up to Christmas.