Tata Group warns UK over harsh business tax regime

Aug 24 2014, 18:29 IST
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Last month, Tata Steel cut 400 jobs at its factory in Port Talbot in south Wales. Reuters Last month, Tata Steel cut 400 jobs at its factory in Port Talbot in south Wales. Reuters
SummaryThe Tata Group, one of Britain's largest employers in the manufacturing sector...

The Tata Group, one of Britain's largest employers in the manufacturing sector, has warned the government over its commercial tax rates system, saying it is making Britain less attractive for the industry.

Joining hands with American auto giant, General Motors, the Indian multinational conglomerate lamented that business rates are five to 10 times higher in Britain than equivalent taxes in the rest of Europe.

The two companies are particularly opposed to the fact that plant and machinery fall within the levy while other kinds of equipment like IT hardware do not.

"Large-scale manufacturers constantly need to invest in upgrading their machinery. But these improvements are taken into account in revaluations, leading to higher business rates," Andy Pickford, Tata Steel's director of property, told The Sunday Times.

"A change for the better would be to do away with this disincentive to invest by removing manufacturing plant and machinery from rates assessments," Pickford said.

Last month, Tata Steel cut 400 jobs at its factory in Port Talbot in south Wales — a move it partly attributed to business rates, as well as high energy prices and environmental costs.

The company lost around 16 million euro in Europe the year until March, against a loss of 283 million euro in the previous year.

Business rates contribute around 22 billion pounds to the UK Treasury every year.

However, Chancellor George Osborne had raised hopes of a review in the last year's autumn statement. But there are fears that any reform could be reduced to tweaking because the tax is so lucrative.

Tim Tozer, chairman of GM in Britain, said the current business rates system is fundamentally flawed and works against manufacturing.

"The system is based on hypothetical rental values where there is no rental evidence for large-scale manufacturing. Manufacturing is also further penalised in the current system with plant and machinery considered part of the rental value, so investment in manufacturing equipment results in an increase in business rates," Tozer said.

The British Retail Consortium is also calling on the main political parties to include a fundamental overhaul of business rates in next year's election manifestos.

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