Consultation Response: Rating of Commercial Properties: small businesses, large retail properties and empty shops
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Rating Policy Division
Department of Finance and Personnel
3rd Floor
Longbridge House
20 – 24 Waring Street
BELFAST
BT1 2EB
Consultation Response: Rating of Commercial Properties:
small businesses, large retail properties and empty shops
Asda strongly rejects the case m ade by the Northern I reland Ex ecutive for the
introduction of a Large Retail Levy to subsidise the cost of providing additional
rates relief to sm all businesses. The Levy w ill m ean a 20% increase in business
rate bills for the 77 retail properties affected in order to raise £6.5m to return an
average of £730 per annum to around 9,000 sm all business properties (across all
sectors) w ith an NAV of betw een £5,001 and £10,000. This consultation response
sets out our k ey concerns and suggested alternatives. W e have focussed our
com m ents on Section 3 of the consultation paper, how ever this response covers
questions 1-9.
It makes Northern Ireland a less competitive place to do business than the rest of
the UK and undermines business confidence
• The tax sends the wrong message to businesses who want to invest in Northern Ireland
and introduces an additional penalty for operating in NI. The clear message is that the
Executive is happy to penalise some successful businesses but not others.
• Doing business in Northern Ireland is already more expensive than the rest of the UK.
Transportation costs in particular make it difficult to keep prices down for NI consumers.
Securing planning consents and licences such as alcohol are also more time consuming
and costly.
• Northern Ireland is already an expensive market to operate within. For example our
distribution costs are higher; as are utility prices. This is compounded by a planning
process which is slower than Scotland, Wales or England; a pharmacy market which is
extremely challenging for new providers to enter into, despite it being a key service our
customers ask us to provide in our stores. Forthcoming regulatory regimes also add cost
to our operations including a carrier bag charge, a potential ban on alcohol promotions
and the introduction of minimum pricing and a tobacco display ban. An antiquated Beers
Wines and Sprits licensing system also adds significant cost and risk to our developments
in NI.
• The introduction of the retail levy in introducing a higher tax on businesses investing in
NI runs counter to proposals to devolve and reduce corporation tax to encourage
businesses to invest in NI.
The Northern Ireland Executive should be encouraging growth and supporting job
creators not penalising them
• One of the areas set to benefit from our growth plans is Northern Ireland. We have
already invested substantially in new stores and want to bring more supermarket choice
to the NI consumer. The Executive is penalising one of the few sectors that continues to
grow and create jobs during the economic downturn.
1• We are concerned about the wider viability of new stores. The Large Retail Levy is not a
tax on our bottom line but rather of each individual store. The tax will make NI less
attractive to invest in. Our parent company, Wal Mart, can choose from over 14 countries
to invest in. Any additional retail taxation will make NI less attractive to invest in, not only
within a UK context, but also across our international chain. NI stores typically score
relatively low in our return on investment calculations. Business rates in Northern Ireland
are already at a level higher than local property taxes in most other EU countries and this
proposed levy will exacerbate that position.
This is the wrong time to be adding a new tax burden to retailers
• The Levy has been presented as a ‘downturn measure’. Increased fuel costs, commodity
price rises, falling consumer disposable income and increased taxation costs make this
the most challenging trading environment we have seen in many years – this is a
challenge for all retailers including large businesses. Penalising large businesses during
these tough times is perverse and a disincentive to invest and thereby puts at risk the
creation of new jobs.
• Customers in Northern Ireland have the lowest level of discretionary household income
than any other part of the UK. Our Asda Income Tracker shows that family spending
power in Northern Ireland continues to suffer. In fact in Q2 of this year it dropped to
just £80 per week from £87 in Q1. That compares to the UK average of more than £150
per week and the Scottish figure of just over £100 per week.
• We find it highly unlikely that the NI Executive will find it politically acceptable to
withdraw small business rates relief after three years. The experience in other parts of
the UK is that this support will be sustained, if not increased over time.
It is a tax on individual stores and communities
• It has been suggested that because supermarkets are successful, high turnover
businesses, the tax can simply be absorbed. This fails to recognise that we operate on
very low margins. Indeed for every pound that comes off our bottom line, we need to sell
twenty pounds of goods through our tills. For Asda in Northern Ireland that would mean
an additional £10 million a year – at a time when sales are under real pressure.
• We do not accept the argument that UK wide turnover generated by more than 400
stores and our online business justifies introducing a new tax in NI. The tax affects 7
Asda stores in NI – each of which operates on a clear assessment of its individual cost to
operate, turnover and individual store profitability. Decisions on creating more jobs in
stores, investing in extensions and undertaking refurbishments are made on a clear
assessment of the individual store profitability.
It is an unfair tax which singles out the retail sector over other industries
• The retail sector already pays approximately a quarter of all business rates across NI, the
highest proportion of any sector and there is no justification for selecting the retail sector
to pay more over other industries
• It is unfair to ask retailers to subsidise reductions in business rates for small businesses
across all sectors
o Asda is already a significant business rates payer in Northern Ireland. Our
annual business rates bill is £4.1m
o We estimate that the tax will cost Asda an additional £0.5m in 2012-13 – a 10%
uplift in our business rate costs across NI
o The increase for those stores affected is 20%
2• While there is no question that businesses are operating in an extremely challenging
economic climate, we strongly question why banks, betting shops and other chains are
set to benefit from the Small Business Rate Relief, simply because they occupy smaller
premises. We do not believe it is the role of retailers to subsidise these already
successful businesses.
• By penalising the retail sector the new tax creates some major anomalies. There are
many large and successful businesses operating in NI which will not be asked to
contribute more. The consultation paper shows that retail makes up only 30% of the
properties valued above £500,000. Yet the Executive does not propose to introduce a
levy on the Electricity or Gas Companies that make up 10% or the additional 10% which
includes the banking sector.
The Northern Ireland Executive could have chosen other fairer ways to raise the
£6.5m
• Based on the Executive’s overall commitment to extending the existing Small Business
Rates Relief scheme (SBRR), we have looked at the data available to develop some
alternatives to a Large Retail Levy to fund the Relief.
• We do not believe that the retail sector should be used to subsidise other sectors of the
economy. If the Executive wishes to support small retailers then it should reform the
proposal to apply only to small retail class properties (but excluding larger retail
businesses occupying multiple premises). Limiting the recipients to Class A1 properties
would be simple to administer.
• If the Executive remains committed to extending small business rates relief to all sectors
then we believe it must be made fairer. We therefore suggest a number of options for
improving the fairness of the proposal:
The data that we have seen suggests that a number of banks, building societies and
betting shop chains, for example, would be set to benefit from the SBRR. We do not
believe it is the Executive’s intention for such businesses to receive subsidies. Therefore,
we would like to see the SBRR aligned to similar schemes which are administered in
Scotland and England by ensuring that larger businesses which occupy multiple premises
which would otherwise benefit from the relief are unable to do so. This would ensure
that small businesses that are the intended recipients for this Relief are the actual
beneficiaries.
• Similar schemes in Scotland and England are funded by ratepayers of all larger properties
and do not rely upon retail-only support. It is unclear why the levy, which would
represent an unprecedented rise in rates bills and transfer funds to all sectors, is
specifically being targeted at retailers. We believe the Executive should seek an equitable
funding scheme for the SBRR whereby all ratepayers of all larger properties share the
burden of funding the Relief, as is the case in Scotland and England.
• Here are just 4 examples of how this could have been shared more equitably:
• Divide among all businesses not eligible for small business rates relief would
result in a levy of less than 1p (0.63p which is similar to the large business levy
in Scotland)
• Divide among all properties with NAV in excess of £100,000 would result in a
1.13p levy
• Divide among all properties with NAV in excess of £250,000 would result in a
1.74p levy
• Divide among all large RV payers at the level of NAV £500,000 would result in a
2.77p levy
3• These alternative schemes are not only fairer, ensuring that other large businesses pay
their way and that the retail sector is not used to subsidise other successful industries
including utility companies and banks, they would not present a barrier to new
investment.
• Given that the Executive expects inflationary increases of 2.2%, 2.7% & 2.7% over the
next three years to all business rate payers, the £6.5m could also be raised by adding a
further 1% increase above inflation – so less than half of the inflationary increase.
• At these alternative rate levels, retailers such as Asda would continue to welcome
discussions with the Northern Ireland Executive on how we can work together on
regeneration including through the use of Business Improvement Districts. We urge the
Executive to give due consideration to these proposals which would deliver a more
equitable system.
• We call on the Executive to provide assurances that if business rate buoyancy means that
business rates raise more than expected, any surplus is used to provide a rebate to those
paying the large retailer levy. In Scotland the Finance Secretary John Swinney MSP had
stated that the £30m proposed levy was vital to public spending, however a review of
business rate income meant that the money was no longer required and an additional
£70m of funding was available to the Scottish Government from business rate income.
• It has been suggested that the accelerated passage process may be used. We believe
that this is wrong and that the Assembly should be given time for full and detailed
consideration of the issues and evidence.
The tax should not be used as a way to penalise large developments
• The tax has attracted some support from those who oppose out of town developments.
However, the consultation states that the aim is “not intended to deliberately target
premises that are outside of town centres”. In fact it is a blunt instrument impacting on
town centre, edge of centre and suburban centre stores as well as out of town stores.
• The tax will be paid by all large retailers irrespective of where they are located – there is
no differentiation between town centre, edge of town or out of town or between types of
retailer.
• The Planning framework is the appropriate way to guide where new store developments
should be not the tax system
It is a tax on a sector that is delivering for Northern Ireland and a tax on jobs and
investment
• Retail has the potential to help drive Northern Ireland’s economy forward and is one of
the few sectors still investing in capital infrastructure and creating new jobs
o Asda has 16 stores in Northern Ireland employing 4,500 colleagues – our stores
provide around 0.5 per cent of the entire workforce of NI
o Since coming to NI, we have invested £92 million in our properties. We are
committed to developing new stores in NI and growing our business, creating
more jobs in construction and longer term in communities across NI.
o As we grow our business, we are investing in local businesses – in 2010 we
invested over £60 million a year on ‘Island of Ireland’ products. Currently 20%
of all food sold in our NI stores is supplied by NI/RoI food companies i.e. approx
£1 in every £5 spent in ASDA in Northern Ireland is on ‘Island of Ireland’ sourced
products.
o Asda’s commitment to NI industry has a major positive benefit by supporting a
supplier wage bill of approximately £16 million and more than 600 jobs (as at
4end 2008). Cebr has calculated that Asda supports an estimated 4,200 jobs
through its suppliers and knock-on impacts in NI.
o Therefore Cebr calculates that the total number of jobs directly and indirectly
supported by Asda in NI is around 8,700 – 1% of all workforce jobs in Northern
Ireland.
o Asda in Northern Ireland contributed £138 million to government spending in
2008/09 in tax – enough to build 10 new primary schools. Asda’s total GDP
impact in NI is estimated at £185 million.
• We are ambitious for Northern Ireland. To mark our ten year anniversary in Northern
Ireland in 2010 we announced plans to invest £100 million in NI, creating a further 3,000
jobs.
• The average capital cost of a new store is £12.5m and can sustain 200 construction
industry jobs for the period of the build.
• We provide jobs for a range of people across Northern Ireland, often in some of the more
deprived communities providing much needed employment for local people.
• Since 2005, Asda has created 2,000 jobs in Northern Ireland.
• Asda is committed to providing job opportunities for those who find the labour market
challenging, such as lone parents, people with disabilities, those with long-term health
conditions and the lowest qualified.
Asda is delivering on skills and investing in communities across NI
• Earlier this year we made a series of commitments to improving the skills of young
people and our colleagues across the UK:
o 15,000 work experience placements for 14-16 year olds.
o Each store will adopt two local schools or colleges and help their students
prepare for working life.
o 15,000 opportunities for colleagues to earn a Level 2 Apprenticeship in Retail
Skills.
o Every one of the 28,000 new starters this year will receive a City & Guilds
qualification after their initial in-house 12-week training.
o We are the first company to trial Work Clubs with the Department for Work &
Pensions – a local partnership between Asda, community groups and
JobcentrePlus to help people back in to work.
• The Asda Foundation has donated almost £100,000 to community and charitable projects
in Northern Ireland in the past 18 months including:
o Ballyclare - War Memorial Garden - £10,000
o Cookstown - Humpty Dumpty Playgroup - 9,000
o Cookstown - Soup Kitchen - £1,000
o Omagh - Youth Sport Omagh - £25,000
o Strabane - Community Football Project - £7,000
o Kilkeel - Sea Shell Project - Outdoor area - £10,000
o Newtonards - Crossroads care for carers - £35,000
• Unlike other retailers, our prices are the same across the country, no matter if you live in
Belfast or Birmingham. ASDA recently won the Grocer 33 award for lowest priced
supermarket for the fourteenth year in a row, demonstrating our commitment to saving
5our customers money. Our Asda Price Guarantee means that our customers will always
save money with us or we refund the difference. By keeping prices and therefore
inflation of everyday household purchase low, we have helped families across Northern
Ireland who have struggled with significant cuts in discretionary spending power over the
past year and our national pricing policy has led to lower prices through competition
across the country.
• Our low prices and national pricing policy means that motorists in NI benefit from our low
fuel prices too. Although fuel prices fluctuate frequently, Asda’s aim remains the same.
We always want to be the first retailer in each part of the country to drop prices and the
last to put them up. And when we do drop prices, we drop them everywhere, setting a
maximum national price cap for our customers across the UK, which mean they all
benefit from our low prices, regardless of where they live. There is plenty of research
that demonstrates the positive impact of our low prices. The AA estimates towns with an
Asda pay on average 2p less a litre for fuel than those without.
18th October 2011
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