Is it possible to incentivise and capture local wealth? The business rate challenge

How can Government and the Treasury reconcile two often contradictory aspects of the commercial property tax model in England? On the one hand, commercial property tax is required to be responsive to economic conditions, promoting investment in property and business. On the other hand, local commercial property tax, in part, is required to fund local public services. This situation reveals a contradiction in government tax policy that has a direct impact upon local, regional and national economic activity. This Viewpoint article considers the nature of commercial property tax in England, the business rate system, the competing pressures upon the business rate system before considering the main alternative on offer in England, land value tax. Despite the undoubted economic elegance of this instrument, any move towards land value tax should be approached with caution. Any solution to the current business rates impasse should not be led by a pragmatic focus on tax collection. Nor should prevalent issues, the high street, the need for digital tax or public finance demands be considered in isolation – they should be tackled together because they are part of the same complex situation.