IPTI | Update on U.S. & EU Property Tax Issues: November 2022

The EACC, in partnership with the International Property Tax Institute (IPTI), wants to keep its members up to date with the latest developments in property taxes in the USA and Europe. IPTI has put together below a selection of articles from IPTI Xtracts; more articles can be found on its website (www.ipti.org).

United States

New York: Real Estate Makes Up Larger Share Of NYC’s Tax Revenue Even Amid Value Reset

Real estate taxes have steadily become a larger and larger part of New York tax collections over the last eight years as the city faces a fiscal crisis.

In the financial year ending 2021, real estate-related taxes made up 54.1% of tax collections, up from an average of 51.9% between 2015 and 2018, according to a new report from the Real Estate Board of New York.

Titled The Invisible Engine, the report’s objective is to show real estate’s value to the city’s economy. REBNY said real estate taxes will account for more than $35B in the city’s adopted budget for the financial year ending in 2023 while $30B will come from all other tax sources. Residential sales, which soared last year, pushed tax collections by $1.3B – making up for the damage done to commercial properties like office and retail.

“This report is another reminder that the health of the real estate sector and the City’s finances and economy are inextricably linked,” REBNY President James Whelan said in a statement. “Even throughout the pandemic, the real estate industry has been the single most important source of revenue for New York City, a fact that will only become more pronounced in the years ahead. We look forward to our continued partnership with City and State leaders to further strengthen these ties.”

The report notes that the mansion tax and new urban transit/mortgage-recording taxes introduced in 2019 contributed more than $1.3B to MTA operating expenses and the “capital lockbox” in 2021.

The city’s 2023 budget of $101B is more than $10B less than the year before, according to Comptroller Brad Lander’s office, and overall tax revenues are expected to be $1B less than fiscal year 2022 because of the expectation of slower economic growth.

“[The mayor] is already telling some agencies they need to take a 30% cut at this moment,” Queens Borough President Donovan Richards in an interview with Bisnow last week. “So, we [are] dealing with a crisis of great magnitude.”

New York: Appellate court upholds town’s valuation of Colonie Center mall

Owners had said it was overvalued for tax purposes

A mid-level appellate court panel has ruled against the owners of Colonie Center in a dispute over the mall’s value, which is used to calculate school and property taxes.

“We find no error in Supreme Court’s rejection of (Colonie Center appraiser Edward) Williams’ appraisal and resultant dismissal of these proceedings,” appellate justices wrote in an Oct. 27 decision upholding the lower trial court’s opinion.

In that case, the trial court rejected the contention of appraiser Edward Williams that the mall was over-valued for tax purposes between 2017 and 2019.

The dispute did not include Macy’s and the former Sears anchor store, since those two sections of the mall were in separate tax parcels.

Williams offered a number of technical reasons why he believed the mall was overvalued, including the idea that long-term leases were not reflective of what Colonie Center was bringing in each year.

And justices discounted the reduced rents that some tenants were paying in the mall.

“(Town of Colonie appraiser Kenneth) Gardner explained that the reasons for a tenant’s willingness to pay a particular rent vary and that renewing a major tenant at a reduced rent often benefits the mall as a whole,” the justices concluded.

“He also credibly testified that in-place leases are routinely modified or adjusted throughout their terms, undermining Williams’ assertion that long-standing leases cannot be considered reflective of market value.”

Justices also noted that it’s not unknown for rents to be renegotiated in response to changing economic conditions.

Williams had argued that the property had a market valued at approximately $72 million, $68 million and $64 million, respectively, between 2017 and 2019.

Gardner pegged the market value at $96 million, $98 million and $101 million, respectively, during that same time period.

The appellate justices ruled in favor of Gardner.

For tax purposes which include a number of other factors, though, the mall is valued at about $65 million.

Precise levels were unavailable Friday, but the mall generates more than $1.5 million annually from property taxes for the South Colonie school district, with about $342,000 to the county and $244,000 to the town.

Colorado: Court of Appeals Clarifies Time Frame for Property Tax Reassessments

The Court Remanded the Case to Determine Whether COVID-19 Was an “Unusual Condition”

After more than two years, it seems that the various COVID-19 public health orders are behind us. But, to borrow a phrase from Karen Carpenter, a recent court of appeals decision shows that pandemic-related property tax issues have only just begun. If the decision remains the law, commercial property owners may have more options to lower their property tax assessments in future years.

In Colorado, property value is assessed every two years, and takes effect on Jan. 1 of odd-numbered years. That assessment carries over to the even-numbered year and can only be reassessed under three circumstances: (1) to correct a clerical error or omission; (2) to correct an incorrect value; or (3) to adjust for an unusual condition affecting the property. Thibodeau v. Denver Cnty. Bd. Of Comm’rs, 2018 COA 124. Traditionally, very few property owners demand reassessment. The COVID-19 pandemic, which significantly reduced revenue generated from many commercial properties, placed a spotlight on this seldom-invoked statute.

In a flurry of lawsuits, property owners across the state are claiming that the COVID-19 pandemic is one of those very circumstances requiring reassessment. The first case to obtain a decision at the Colorado Court of Appeals is MLS Properties, Inc. v. Weld Cnty. Bd. Of Equalization, 2022 COA 117, in which a group of 55 property owners in Weld County alleged that Colorado’s property tax assessment statute, C.R.S. § 39-1-104, required the assessor to revalue the plaintiffs’ properties because of two unusual conditions: the COVID-19 pandemic and the resulting governmental orders restricting property use. In response, Weld County argued that the pandemic and its associated governmental orders occurred too late to be considered in the 2020 property assessments. The county claimed that the 2019 assessment only carried forward to Jan. 1, 2020, and therefore the pandemic occurred too late in the process to be considered an “unusual condition.”

The Court of Appeals’ subsequent decision, unless later reversed, will impact future property assessments. First, as a matter of first impression, the court held that the property tax assessment statute requires assessors to consider the unusual conditions that occurred “at any point during the even-numbered calendar year of the reassessment cycle, not just those that are present before January 1 of the even year.” This opens up the time frame under which property owners may seek reassessment based on any of the above three circumstances and means that circumstances that occur at any time within the two-year period between assessments are relevant for reassessment. For example, the COVID-19 pandemic, which started impacting Colorado in March 2020, now falls within this time frame.

Second, the court remanded the case so the trial court could hold further proceedings on (1) whether the pandemic was, in fact, an unusual condition and (2) whether the related government orders constituted new regulations “restricting or increasing the use of the land” under C.R.S. § 39-1-104(11)(b)(I). In other words, while the court did not decide whether the COVID-19 pandemic and related orders constitute unusual conditions, the court also opened the door for the trial court to find them to be unusual conditions after presentation of additional evidence.

The deadline to reassess property taxes for 2020 has passed. Nevertheless, considering that the trial court may later determine that COVID-19 and the related government orders are unusual conditions, commercial property owners would be wise to consider how COVID-19 has impacted their revenue and property values for tax years moving forward and whether to file a protest. While the traditional deadline to protest 2022’s property taxes has passed for reassessment of 2022 property taxes, other options may be available, such as an abatement proceeding.

Oklahoma: Wind farm valuation judgement could impact schools

Canadian and Kingfisher Counties assessors lost their appeal last month against Kingfisher Wind LLC in a case that had originally determined Production Tax Credits (PTCs) were intangible property, and therefore, excluded from taxable valuation.

This decision affects the dollars that school districts will receive from wind farm ad valorem taxation. There are several other cases and state court ad valorem challenges filed by wind companies in about 15 other counties in Oklahoma, including Kay County.

School districts are some of the primary beneficiaries of county ad valorem taxes, and the amount of money that a school can borrow through voter-approved bond issues also is based on the assessed value of that property.

Property tax in Oklahoma, unless exempt by law, is subject to ad valorem taxation in the county in which it is located, at a percentage of its fair cash value.

The fair cash value, is the value that a willing buyer would purchase from a willing seller, both of whom are knowledgeable about the property.

The job of the country assessors is to determine what the fair cash value of all taxable property is within the county.

These valuations can be challenged by property owners by filing a protest with the county board of adjustment and then by filing a district court lawsuit.

The true impact of this decision is unknown at this time as the assessor has not provided any detail about how the judgement will be applied to the current protests and the upcoming 2022 valuations.

Louisiana: Voters reject amendment affecting property tax adjustments

Louisiana voters rejected a proposed state constitutional amendment meant to give local taxing authorities more flexibility with millage rate adjustments.

Both chambers of the state Legislature unanimously approved putting Amendment 5 on Tuesday’s ballot, and it had the support of the Council for a Better Louisiana. The business lobby did not take a position.

The amendment would have eliminated a quirk in the law that says to maintain full taxing authority to roll millages forward, the local entity must exercise it at least once every four years between reassessments or permanently lose it. It called for letting taxing bodies increase rates up to the maximum allowed until that authorized millage rate expires, rather than until the next property reassessment cycle.

Voters approved three of the eight proposed amendments, according to complete but unofficial results from the Louisiana Secretary of State’s office.

• Amendment 1: Let the state increase to 65% the maximum amount of money seven state trust funds can invest in the stock market: 36% yes, 64% no.
• Amendment 2: Extend property tax exemption available to veterans with service-related disabilities to their surviving spouses after their deaths: 73% yes, 27% no.
• Amendment 3: Allow most civil service employees to support an immediate family member’s political campaign: 33% yes, 67% no.
• Amendment 4: Let local water districts reduce customers’ water bills if charges stem from water lost outside of the customer’s control: 75% yes, 25% no.
• Amendment 5: Give taxing authorities more time to decide whether to “roll forward” millages: 43% yes, 57% no.
• Amendment 6: Capping reassessment increases of homes in Orleans Parish to 10%: Slightly more than 50% no.
• Amendment 7: Allow involuntary servitude only for “lawful administration of criminal justice.” (The amendment’s author recommended rejection due to confusion over the wording.): 39% yes, 61% no.
• Amendment 8: Remove the requirement that certain property owners with disabilities annually certify their income to get their property tax rates frozen: 55% yes, 45% no.

North Carolina: Higher taxes to come? Ready or not, another revaluation is coming in Mecklenburg County

Amid an exceptionally hot housing market, Mecklenburg County is anticipating another dramatic increase in property appraisals as the revaluation nears.

Higher home values could lead to higher property taxes – depending on whom voters elect to local offices this November.

What’s happening: Government assessors are reappraising more than 400,000 parcels across Mecklenburg County. The revaluation process is supposed to ensure landowners are taxed their “fair share” – or no more or less than the true market value of their property.

Put simply, the revaluation updates values from a 2019 market (the time of the last revaluation) to a 2023 market.

Why it matters: This spring, after the revaluation, the Mecklenburg County Board of Commissioners and city and town leaders will adjust tax rates. They could go up, down or remain “revenue neutral,” meaning property owners’ tax bills would stay roughly the same.

For example, in 2019, the county lowered its tax rate from 82.32 cents per $100 to 61.69 cents per $100. Since values went up significantly, it was still a tax hike, nearly 2 cents higher than the revenue-neutral rate of 59.7 cents.

The big picture: The revaluation, and the tax hike debate to follow, has become a talking point in the races for Mecklenburg County Board of Commissioners seats. Both The Charlotte Observer and WSOC have asked candidates where they stand on a potential tax increase.

Most Republican candidates favor lowering taxes or adopting a revenue-neutral rate, referencing ballooning inflation and families’ persisting financial struggles from the pandemic. Some Democratic candidates say it’s too early to make a decision, and they want to more information from staff first on whether it can meet citizens’ needs with a revenue-neutral rate.

Republican candidate for District 4, Ray Fuentes, is opposing the revaluation entirely and has told outlets he would vote to stop it from happening in December.

By the numbers: The Mecklenburg County Assessor’s Office is estimating a 48% median increase in residential assessed values and 36% in commercial.

To compare: The median increase for property values in 2019 was 43% for residential and 77% for commercial, the Observer reported at the time.

How it works: The Mecklenburg County Assessor’s Office has divided the county into 3,100 segments, or “neighborhoods,” to study as a “mass appraisal.” By tracking sales and monitoring market data in these areas, staff will capture the values of the entire neighborhoods on Jan. 1, 2023.

“Let’s just say there’s a neighborhood of 200 parcels. Over the last year, we’ve had 15 transactions,” Ken Joyner, county assessor, told Axios. “We’re going to look at the median of those 15 transactions and use that to consistently value those homes.”

The assessor’s office keeps tabs on sale records that detail structures’ square footage and reviews permits for significant renovations that may add to a home’s value. Over the last several years, staff have visited every property in the county, noting conspicuous changes that weren’t documented in the permitting process.

Most homes within a neighborhood appraise similarly, Joyner says. But sometimes assessors in county shirts (with a county car, an ID and business cards) will walk through neighborhoods, knocking on doors to talk to homeowners and checking out the exteriors.

“It’s really about making sure that we’ve got the right square footage on the home, that we understand the number of bathrooms in the home, things like that that are really going to have weight,” Joyner says. “Is it a heat pump or is it a gas pack? … Do they have a really nice patio in the back, or is it just an 8 by 10 deck?”

Flashback: North Carolina law requires revaluation every eight years, although most counties in the region (including Gaston and Catawba counties) have moved to four-year cycles. When Mecklenburg County conducted its last revaluation in 2019, eight years had passed, and the drastic spikes in valuations sticker shocked residents. This is the first reappraisal since the county committed to a four-year cycle.

What we’re watching: Residents in gentrifying neighborhoods could face displacement if their property values rise and increased taxes follow. Plus, people of color and low-income homeowners are less likely to appeal their valuations, whereas those of wealthier backgrounds can hire lawyers and slash their tax burdens.

In 2020, the Carolina Panthers, for example, knocked $357 million off the Bank of America stadium’s valuation by appealing, Axios previously reported. The break is saving the team nearly $3.5 million per year.

What’s next: Property owners will receive their valuations in the mail this January.

People can either ask for an informal review to go over potential errors with the assessors or, if they feel their estimate is unreasonable, they can file a formal appeal and go before the Board of Equalization and Review.

Texas: Texans returned Republicans to power; they must now give us the money they promised us

The election is over, it’s time to start governing, and the first item on the agenda is property taxes, how to reduce them for homeowners and how not to give them away to big business.

Republican politicians made a lot of pledges on the campaign trail. Now that they control every state-wide office and the Texas Legislature, they owe us the tax relief and a brighter economic future they promised.

High inflation will give Texas lawmakers at least $27 billion in unexpected revenue to spend when they meet next year, Comptroller Glenn Hegar reported. Higher prices generate higher sale tax revenues, and the oil and gas industry’s success – thanks to global chaos – means higher severance tax revenue.

Gov. Greg Abbott said he would use half the windfall for property tax relief. But making promises is easier than keeping them.

The state does not impose property taxes; local authorities levy them. And even when local authorities maintain the same property tax rates, tax bills go up in tandem with higher property values. State officials have little control over either locally elected officials or property values.

Abbott and his allies could mail out refund checks or buy down local property taxes with state cash. For example, the state can contribute more to public schools so districts can lower tax rates. But both solutions are one-offs and do not permanently lower taxes.

Past GOP efforts to reduce property taxes have rarely reduced bills by more than a few percentage points. If Abbott manages to pass $13 billion in property tax relief over the next two years, that will represent, at best, an 8.5 percent one-time decrease based on 2021 tax bills of $73 billion.

If property values rise 8.5 percent, then it’s a wash. Also, the tax relief will go away when that revenue surplus goes away.

Meanwhile, GOP leaders want to bring back property tax breaks for corporations, previously known as Chapter 313 incentives, after their place in the tax code.

For 20 years, Chapter 313 allowed local school boards to grant tax breaks to attract commercial investment. After approval by the comptroller, the state would then reimburse the school district for the lost revenue. Then the corporation would kick in a little extra cash for schools.

In 2020, local officials approved $10.8 billion in tax breaks.

An investigation by my colleagues Eric Dexheimer and Mike Morris found a poorly administered program that rarely produced the jobs promised or the objectives stated. Conservative and liberal lawmakers teamed up to kill the program in 2023.

Like a movie monster, though, Chapter 313 is springing back to life.

“We have to take a long, hard look at how we’re gonna reestablish the Chapter 313 tax agreements,” Texas House Speaker Dade Phelan said in August, quoted by the Texas Tribune. “We’re gonna come back, and we’re gonna work well together, the House and the Senate. We’re gonna have a version of 313s that are more transparent, with more accountability, more oversight. I firmly believe we can get that done.”

Expect a massive fight over whether to include some industries. Lawmakers backed by fossil fuel interests want to exclude renewable energy projects. Others want to give existing businesses a bite at the apple to help keep them going.

Dick Lavine, a senior policy analyst for the left-leaning thinktank Every Texan, who helped kill Chapter 313, urged lawmakers at a recent hearing to at least negotiate a little harder before giving away billions.

“What we really need is a much better analysis – not just ‘I might move to Singapore,’” Lavine advised. “Let’s see what else is on the table. Maybe a gap analysis and a location comparison, their start-up and operating costs, their taxes and what other incentives they’re getting.”

Politicians, even conservative Republicans, tend to spend like drunken sailors when the treasury is full. The more significant challenge is convincing them to leverage the good times to prepare for the bad.

The Russian invasion of Ukraine and OPEC’s desire to profit from it are why oil and natural gas prices are high. But a global recession could suppress prices, and international efforts to sell only new electric vehicles by 2035 means many drillers are reluctant to invest in big new oil wells.

Natural gas will remain profitable for at least two more decades, but Texas needs to rely less on fossil fuels for its economic future. Will lawmakers invest in new sources of energy and additional universities? Will they begin preparing for a warmer climate with potentially less water?

Probably not. But we should demand our share of the $27 billion surplus and make big business earn their tax breaks. After all, it’s what Republicans promised all Texans.

EUROPE

Ireland: Properties to be hit with new land tax unveiled

Details of properties that can expect to be hit with the new Residential Zoned Land Tax have been published by all local authorities across the State. Landowners have just two months to challenge the inclusion of their properties on council maps, if they feel they have been listed erroneously.

The new 3 per cent tax, which will come into force from 2024, will apply to sites which have been zoned for housing and are supplied with services, such as water and other utilities, but remain idle.

The tax, which is designed to replace the existing vacant site levy, will target any unused land zoned and serviced for housing, regardless of its size. The existing levy, which came into force in 2018, penalises only the owners of sites bigger than 0.05 of a hectare and the majority of the site must be “vacant or idle” for more than 12 months, be zoned for residential or regeneration purposes and be in an area in need of housing.

The new tax will be based on the market value of the land and the rate will be set at 3 per cent, the same the starting point for the vacant site levy when it was first introduced.

Maps indicating lands liable for the tax have been published by each local authority. Landowners have until January 1st to make submissions to their council if they wish to dispute the inclusion of their land on the draft map. Landowners or third parties may also seek the inclusion of sites on the map which have not been registered by the council.

Homeowners may find their properties do appear on the maps, but they will not have to pay the new tax if the land is already subject to local property tax (LPT). However, if the property and the land, gardens or yards attached to it are greater than .4047 hectares (one acre) they will have to register for the tax with the Revenue Commissioners, but they will not be liable to pay it. Registration for the tax will start from late 2023 onwards.

A homeowner may have to pay the tax if they own a residential property that appears on the local authorities’ maps that is not subject to the LPT.

Dublin City Council, the local authority with the most pressing need for new housing development, urged members of the public to view the maps and make submissions for any amendments required. “Dublin City Council requires increased housing supply to meet our housing needs and the new tax aims to incentivise landowners to develop housing on serviced lands zoned for housing, both land with existing planning permission and land without,” council chief executive Owen Keegan said.

Italy: IMU (Municipal Property Tax) On First House: Double Exemption To Spouses Living In Two Different Municipalities

Stop paying IMU for spouses who reside, and habitually reside, in two different homes, irrespective of the municipality in which they are located.

The Constitutional Court ruled this and by ruling No. 209 of October 13, 2022, it re-established the right to the exemption for each primary home of persons married or in a civil union, declaring illegitimate the provision of the 2011 “Salva Italia” Decree regulating the property tax.

In the case at hand, the Naples Tax Commission had raised, with reference to Articles 1, 3, 4, 29, 31, 35, 47 and 53 Cost., questions of constitutional legitimacy of Article 13, paragraph 2, fifth sentence, Law Decree No. 201/2011, as amended by Article 1, paragraph 707, letter b), Law No. 147/2013, in particular in the part IMU exemption was not provided for the home used as main residence of the family nucleus, in the event one of its members is a registered resident under the Population Register and lives in a property located in another municipality.

According to the provisions of Article 13, paragraph 2 of Law Decree No. 201/2011, husband and wife are, in fact, obliged to indicate which of the two homes they own is the main one and to pay the IMU on the other one, which is considered a second property.

Until now, the rule applied only to spouses, while mere cohabitants could own two houses, one each, without paying property tax because they were both primary residences.

Ruling No. 209 of Constitutional Court eliminates this distinction, specifically to prevent it from constituting discrimination against couples who decide to unite in marriage or by civil union. Indeed, the Constitutional Court, in its ruling No. 209 of Oct. 13, 2022 on the subject, declared that “In our constitutional system, tax measures structured in a way that penalizes those persons who formalized their relationship by uniting in marriage or forming civil union cannot be considered “legitimate””.

“In a context such as the current one, in fact,” – it is explained – “characterized by increased labour mobility, development of transportation and technological systems, and the evolution of customs, it is more frequent for people united in marriage or civil union to agree to live in different places, reuniting periodically, for example on weekends, remaining within the framework of a material and spiritual communion.”

Therefore, in order to recognize the exemption on the “first house,” not considering sufficient, for each spouse or person bound by civil union, the registered residence and habitual abode in a given property, determines a clear discrimination with respect to de facto cohabitants, who, under the same conditions, are instead granted, for each respective property, the aforementioned benefit.

In summary, the censured rule would infringe on:

• the “equal rights of workers forced to work outside the family home” (Articles 1, 3, 4 and 35 Const.);
• the “equal right of married taxpayers to de facto partners” (Articles 3, 29 and 31 Const.);
• the principles of tax paying capacity and progressivity of taxation (Article 53 Const.);
• the family as a natural society (Article 29 Const.);
• the “expectation with respect to provisions for the formation of the family and the fulfillment of related tasks” (art. 31 Const.);
• the protection of savings (art. 47 Const.).

The Constitutional Court then clarifies the responsibility of municipalities and institutions to carry out the necessary controls in the circumstance the spouses intestate one property each in order not to pay taxes on the second one as well. Indeed, declarations of constitutional illegitimacy do not in any way determine a situation in which “second homes” can benefit.

In conclusion we can state that the Consulta’s ruling No. 209/2022 opens the way for taxpayers to apply for an IMU refund and excludes municipal assessments. Taxpayers should pay attention to the deadline to apply for refund!

UK: Retailers group calls for business rates freeze to support investment, protect consumers

The U.K. government should freeze business rates to support investment and help keep prices low for consumers, the British Retail Consortium has said ahead of a planned 800 million-pound ($930.2 million) increase from April.

The trade association for U.K. retailers’ Chief Executive Helen Dickinson said Friday that the operating costs for businesses remain high and demand will be tested by the fragile economy and falling consumer confidence ahead of the Christmas period.

An increase in rates, as retailers are also facing higher costs, would force businesses to make decisions on new store investments and the closure of existing locations, she added. Systemic reform should also be undertaken, Ms. Dickinson said.

The British Retail Consortium’s chief executive called on the U.K. government to make the changes as the industry body released statistics for the third quarter of 2022 that showed the overall shop vacancy rate decreased to 13.9%, 0.1 percentage points better than the prior quarter and 0.6 percentage points better on year. The outturn marked the fourth consecutive quarter of falling vacancy rates.

All locations saw improvements in the quarter, the BRC said. Shopping centre vacancies fell to 18.8% from 18.9% in the second quarter, high-street vacancies decreased to 13.9% from 14.0% in the previous three months and retail-park vacancies decreased to 9.7%, a 0.5 percentage point improvement from the comparable period.

London, the South East and the East of England had the lowest vacancy rates, while the highest were in the North East, followed by Wales and the West Midlands, the BRC said.

“The overall shop vacancy rate improved for the fourth consecutive quarter; however, vacancies remain higher than pre-pandemic levels. Some locations are benefiting from a pickup in tourism and a gradual return to offices, but levels of footfall are still below those of 2019,” Ms. Dickinson said.

UK: CBI calls for reforms to promote growth in Autumn Statement

The head of the UK’s largest business lobby group has warned chancellor Jeremy Hunt that he risks pushing corporate Britain into “hibernation” and curbing business investment if the Autumn Statement does not include reforms to nurture economic growth.

Tony Danker, CBI director-general, told the Financial Times he had spoken to scores of companies in the past few weeks about their plans, and was clear Hunt’s statement on Thursday would be key for many of them in deciding whether to invest in the UK or retreat from the country.

Danker said Hunt could not simply talk about economic growth in the statement, adding the CBI was seeking a series of supply-side reforms including measures to address labour shortages. And as the government raises corporation tax from 19 per cent to 25 per cent next April, the CBI wants ministers to provide companies with allowances to incentivise business investment.

Danker said that it was “incumbent” on Rishi Sunak, the prime minister, and Hunt to make “tough choices” for economic growth. But he expressed concern “they will not do that. . . and we will regret that because it will trigger a series of decisions by businesses in the next few weeks that amount to almost a hibernation. . . that they will retract from investing in Britain”.

Danker said many companies were finalizing their 2023 budgets this month with two scenarios: one with plans to invest and grow, and another reflecting a “doomsday” recessionary outlook. “The government needs to be careful on Thursday that we don’t tip confidence in the wrong direction,” he said. “That’s a real risk.”

Danker said some multinational companies were already choosing to move investment away from the UK after the damage caused by Liz Truss’s disastrous “mini” Budget in September involving £45bn of unfunded tax cuts. He also said there needed to be regulatory reform to make economic growth a primary objective, but added the government was still too “fixated about repealing EU law and not about what is restricting growth”.

“A political exercise of repealing EU law does nothing to help,” he said, referring to government legislation to review and repeal EU law. Although Danker said he was one of the first CBI directors general not to call for widespread cuts to business tax, he added that the government “needed to be careful”.

He said the government should look to alleviate the burden of business rates, which are set to cost companies an additional £3bn in April because increases in the property-based tax will be based on inflation at a 40-year high of 10.1 per cent in September.

Danker warned this would lead to lower investment and closures on the high street.

The Treasury responded: “Difficult decisions are needed to restore confidence and economic stability, which will help balance the books, get debt falling and grip inflation. This is the only way to achieve long-term sustainable growth.

“The Autumn Statement on 17 November will set out our plans to boost growth,” it said, “building on the UK’s globally competitive corporation tax rate and investment incentives.”

Authors:

• Paul Sanderson, President | psanderson[at]ipti.org
• Jerry Grad, Chief Executive Officer | jgrad[at]ipti.org
• Carlos Resendes, Director | cresendes[at]ipti.org

Compliments of the International Property Tax Institute (IPTI) – a member of the EACCNY.