AAT responds to UK supermarkets returning business rates relief

Following the recent announcements that a number of large supermarket chains are returning the business rates relief they've received due to the ongoing Covid-19 (coronavirus) pandemic, AAT has issued a comment in response.

Adam Harper, Director of Professional Standards and Policy at AAT, said: "Given that many of the UK supermarket chains have benefited significantly during the pandemic with increased like-for-like sales, returning the high amounts of business rates relief they've received from the government is a positive step and shows that they are willing to act in good conscience on this issue.

"Yet the story will undoubtedly have sparked a new wave of debate around the unfairness of large businesses who have profited from this situation receiving business rates relief and how this is used, including for issuing dividends or shares, and whether a windfall tax should be introduced in such circumstances.

"In our response to the recent Treasury Select Committee inquiry on tax and coronavirus, AAT warned that significant business rates holidays could be perceived negatively, particularly if companies made large payments to their shareholders at the same time. Yet a windfall tax itself would not be a perfect solution to this – as we saw in 1997 when the new Labour government imposed a £5.2 billion windfall tax on utility companies. Despite its initial popularity with the public, ultimately the cost was passed on to the consumer in the form of higher energy bills.

"Likewise, supermarkets are not the only companies to have profited from the current situation, with online retailers like Amazon, technology companies such as Zoom and the pharmaceutical industry all seeing benefits.

"It should also be noted that windfall taxes are only temporary measures, and that they risk signalling to businesses of all sizes that success may be punished further down the line. Similarly, such an approach does not improve tax certainty for the business community. Many of these businesses would also argue that they have incurred significant costs due to the pandemic, such as investment in technology and increased hiring as well as general running costs to protect staff and customers.

"Therefore, although AAT recognises the attractiveness of a windfall tax, especially to a financially hard-pressed electorate, such a tax is not in the long-term best interests of consumers or business. However, if a windfall tax is imposed on companies which have profited during the pandemic, it is imperative that taxpayers and policymakers realise they may face consequences in the form of increased prices, rather than lower dividends for shareholders - potentially risking unpopularity later on.

"This move by the UK's supermarket chains may have reduced clamour for a windfall tax by taking the moral high ground. Now it is up to other businesses to decide if they wish to make similar good faith gestures – or risk losing out on customers in years to come – and for government to consider long-term structural reform to the tax system."