Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Chemical Industries Association (LGB 07)

  In response to the request for evidence in the Press Notice dated 13 May 2002, I am writing on behalf of the Chemical Industries Association, which is the principal industry body for the UK chemical industry, representing some 300 manufacturing sites distributed throughout the UK. The majority are located in England and are valued according to the contractors' principle. The industry pays some £200 million annually in non-domestic rates.

  Domestic manufacturers are part of a global industry and depend critically on their competitiveness to survive and flourish in international markets. Amongst our main west European competitors, UK is alone in levying property based local taxes to collect such a high proportion of business taxes. (This year business rates are projected to raise the equivalent of 56 per cent of corporation tax.) These non domestic rates represent a tax on the fixed asset base unrelated to business conditions and profitability and can constitute a major burden especially during times of recession or when profit margins are thin as they are for many bulk commodity products in the chemical industry.

  We are therefore very concerned with any proposed measure, which would raise the burden of taxes on already hard-pressed chemical manufacturers. For internationally competitive businesses additional taxes cannot be recouped through raising prices, and therefore result in reduced profits and/or lower funds for investment—reducing the attractiveness of locating investment in Britain.

  As we have argued against the introduction of similar non-domestic rating provisions in Scotland, we do not accept that rates should be used in a redistributive manner. Differentials between the valuations of large and small properties are already reflected in rent and rateable values. If it is intended to help small businesses, then this should be done through mechanisms other than business rates.

  We have nothing against helping small businesses, and indeed welcome many of the government's recent measures with this objective. However, we believe the costs of doing so should be borne out of general taxation rather than funded from larger businesses.

Keith Wey

Senior Economist

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