Budget 2021: Business leaders calling for fundamental changes to digital taxes and Business Rates

• All of business leaders surveyed in the North West expressed a clear wish to see the government expand digital taxes to cover a wider range of online sales compared to a national average of 85%
• One in five (21%) believe that Business Rates should be abolished, opting instead for the tax to be based on rents actually charged or a percentage of profits  
• Nearly 57% of respondents would like the Chancellor to support CO2 reduction by giving tax reliefs where companies innovate and meet environmental standards

The government should expand digital taxes to cover a wider range of online sales according to a poll of over 1,000 business leaders by accountancy and advisory firm BDO LLP.

All respondents in the region – even those which would be directly impacted – indicated that with many online businesses flourishing while many traditional businesses have struggled, a trend that has increased during Covid-19, much-needed revenue should be raised by taxing online sales.

Expanding digital taxes is not the only area that respondents would like the government to introduce changes. When asked how the Chancellor should change Business Rates for 2021 considering the difficulties that hospitality, retail and other high street businesses have faced, only one in five (21%) would opt to abolish Business Rates. Instead, nearly one in three (32%) would like Business Rates to be based on rents actually charged or for property owners to be charged a percentage of profits.

Meanwhile, the green agenda appears to be another priority for businesses, with over half of respondents (57%) believing that the government should use post-Brexit freedoms to increase business innovation in the UK through supporting CO2 reduction. This could be achieved by giving tax reliefs where companies innovate and invest to meet environmental standards.

Finally, opinions are divided about how the Chancellor should deal with the issue of intergenerational wealth and opportunity which has come into sharper focus as younger generations have borne more of the economic burden of the pandemic. Nearly 40% would like a well-funded skilled-based programme to be established in order to train individuals whose jobs no longer exist. Whereas, one in three (31%) would rather the government prioritised simplifying Inheritance Tax to help the older generations pass on their wealth. 6

Commenting on the survey’s findings, Ed Dwan, partner and head of BDO in the North West, said: “Business leaders are looking for the government to introduce progressive steps to help individuals and businesses flourish. This survey shows that most business leaders accept that higher taxes on companies will be a key component to the post-Covid-19 recovery and would like the Chancellor to overhaul Business Rates, digital taxes and green taxes.

“The major stumbling block for taxing online sales will centre on how to get digital companies to bear the burden of the increased tax rather than pass it on to consumers. Where digital companies have thrived, the high-street has unfortunately suffered, leading to renewed calls for Business Rates to be overhauled. Although the temporary exemptions introduced by the Chancellor have been helpful to some businesses, Mr Sunak should certainly consider long term solutions to how this operates.

“As a region, we have ambitious carbon reduction targets and it’s clear from this research that the business community is supportive of further environmental taxes which will be key to a green recovery.

“Understandably, this survey also shows that many business leaders are concerned about the impact of Covid-19 on younger generations, with the majority of respondents either calling for IHT to be simplified to enable succession planning, or the introduction of a skills-based programme to provide opportunities to those out of work following the impact of Covid-19”.