STORMONT Finance Minister Máirtín Ó Muilleoir has announced a truly remarkable plan to take from the poor to give to the rich – the exact opposite of a Robin Hood tax.
For his proposals, if adopted, would see more than 26,000 businesses lose their Small Business Rates Relief (SBRR), simply to create a cash pile to give to pubs, cafes and chain stores. This would see the smallest businesses having their rates bill doubled.
There is broad agreement that non domestic rates in Northern Ireland need to be reformed. The challenge lies in how to do it in a way that stimulates growth – and the right type of growth.
The minister says he is not in favour of ‘picking winners’, preferring to ‘seize opportunities’, which is welcome. But the ring-fencing of funds, excluding all businesses apart from ‘hospitality and retail’, would undoubtedly miss opportunities.
Even retail and hospitality businesses that currently enjoy the SBRR will lose their automatically-applied relief, instead having to apply online and prove additional, new expenditure to trigger the relief. Those who have pressed for the change may well have secured a pyrrhic victory that will do damage both to themselves - as the cost of qualifying for the relief may be many times the sum returned - as well as to their small business customers.
Part of the problem with the proposals is that they have been announced directly to the Assembly, without benefit of any other than a discussion paper beforehand which could have garnered beneficial input from the sector. The announcement has shocked and alarmed small businesses, who face a massive hike in their outgoings.
A further issue is that there has been no mention of any form of phasing, as recommended in the academic report on which the minister is relying to justify his changes. But perhaps the greatest concern is the lack of consistency between this proposal and the direction of travel set out by the Executive for the local economy.
The Executive’s economic ambitions are for new high-waged, skilled jobs, coupled with significant export growth, and an entrepreneurial environment that sees start-ups flourish. Proposed changes to the rates system could have been targeted to incentivise any small business that helps deliver on this objective, and to remove barriers from start-ups.
Instead, however, these proposals would limit relief to ‘hospitality’ which, with obvious exceptions, is populated by lower waged and lower skilled workers, and ‘retail’ which is, in large part, an importing sector.
Rates provide consistent revenue for governments, even during economic downturns; but that attraction is also the problem for the payers – rates are unrelated to the ability to pay and unresponsive to trading conditions.
Worse, they are a significant barrier to start-ups, who will have no initial trading income to meet this state-imposed tax that is due immediately upon starting.
That the minister wants to reform the system is welcome, but it must be fair and stimulate the right type of growth.
:: Wilfred Mitchell is NI policy chair of the Federation of Small Businesses (FSB).
