Scottish Government

Nurturing Wealth Creation

Business rates

Business rates are potentially a significant lever in terms of creating a competitive fiscal environment in Scotland. The current position is of major concern to Scottish manufacturers.

There are differences in emphasis depending on the size of the business and the type of manufacturer. For example:

• Within Scotland's Small and Medium Enterprises (SMEs) business rates are the major concern, with one survey showing over 70% of SMEs in Scotland indicating that business rates are a major concern compared with 30% in UK as a whole.
• For Scotland's capital intensive industries, the problem is exacerbated. Chemical plants, pipelines and other installations assessed on the contractors' principle have business rates harmonised with the UK but suffer the product of a higher poundage, particularly in the light of the commitment to harmonisation.

The Small Business Rate Relief Scheme, to be introduced on 1 April 2003, will allow small businesses to receive relief of up to 50%. This is welcome and goes some way towards addressing specific concerns within the SME sector.

However, the Scottish Executive has complete control over both the level of business rate poundage and the form that this local business tax should take.

While the announcement by the Minister for Finance and Public Services, Andy Kerr MSP, in December 2002 that the business rates poundage for 2003-04 will be frozen is to be welcomed, in this area Scotland still remains at a competitive disadvantage with the rest of the UK and possibly with the country's main competitors overseas.

Not only should parity with the rest of the UK be achieved, but there should also be a study to compare the levels of local taxation with our main competitors in Europe and the OECD.

In the longer term, business rates offer the possibility of creating a distinct competitive advantage for Scotland.