Member News

IPTI | Update on U.S. & EU Property Tax Issues: September 2021

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

Does Your Property Tax Assessment Reflect COVID-19’s Long-Term Challenges?

Countless companies have seen their top and bottom lines decimated by COVID-19-related shutdowns, travel restrictions and changing consumer preferences since the start of the pandemic. Yet for many taxpayers, property tax values have changed little or even increased.

Many of these taxpayers have been surprised to receive property tax bills that do not reflect the real and lingering economic challenges that the retail, hospitality, office and other industries have, are and will continue to face. These taxpayers — and even those in industries better suited to weather the storm — should give special attention to ensuring they receive fair and reasonable assessments.

Observe Valuation Dates, Notices and Appeal Deadlines

With a large percentage of employees working remotely, together with an inconsistent postal service, it is more important than ever to have dedicated employees and knowledgeable property tax professionals reviewing property value assessments annually and filing timely protests when warranted. Failure to receive a tax valuation notice rarely excuses a missed protest deadline, so it is vital to know and comply with applicable deadlines.

Many property tax bills issued in 2020 were based on statutory valuation dates that preceded the emergence of COVID-19. For instance, assessors working under a valuation date of Oct. 1, 2019, or January 1, 2020, were quick to tell taxpayers to “wait until next year” before assessments could reflect any impact from COVID-19.

Not surprisingly, some assessors are now arguing that the pandemic was temporary and that its worst effects have passed. In some jurisdictions, assessors simply carried forward the prior year’s cost-based value with no adjustments to account for additional depreciation or functional and economic obsolescence. In other cases, assessors have relied on pre-pandemic sales during the relevant tax cycle to justify increases over the preceding tax year.

Many locales had few sales in the early stages of the pandemic, and in these cases, the assessor may downplay or entirely ignore the actual impact of COVID-19 on market values. In contesting assessments in each of these cases, it is helpful to not only demonstrate the immediate difficulties that began in March 2020, but also the pandemic’s lingering effects on the taxpayer’s current and future operations.

Although the pandemic has affected all industries, certain sectors face unique challenges that will persist well beyond the initial virus surges and vaccine rollouts. These include, but are not limited to, brick and mortar retailers competing with ever-expanding e-commerce, office buildings competing with flexible work options including remote work, and hotels competing for elusive business travel in a cost-cutting environment. Some of these challenges are trends that began long before the pandemic, such as the slow death of enclosed malls as consumers increasingly favor lifestyle centers and online shopping.

COVID-19 Influences by Property Sector

Retail. Since the early 2000’s, e-commerce’s share of total retail sales has increased each year. The pandemic accelerated that trend, arguably by years, when people who had long resisted shopping online no longer had the same in-store options, and experienced online shoppers became more comfortable buying things like groceries and large-ticket items online.

These evolving shopping habits certainly affect the desirability and value of retail real estate, especially of those buildings constructed before the scope of today’s e-commerce world could be contemplated. Landlords must now think outside the box when re-tenanting shopping centers, often filling vacancies with restaurants, service and entertainment concepts. These uses can create parking, zoning and other challenges for centers built for traditional retail.

In the case of big box stores, companies such as Walmart are looking at converting portions of existing stores to warehouse or fulfillment space for e-commerce. All these changes to keep up with the rapidly evolving marketplace shine a light on the functional and economic obsolescence present in many retail properties.

Office. Office landlords are also facing rapid market evolution, including an accelerating trend toward more remote and flexible work options. The pandemic made Zoom meetings ubiquitous and gave employees a taste, and perhaps a future expectation, of more work-from-home opportunities.

In light of the Delta variant’s spread, many large companies have delayed their anticipated returns to the office, with Google now postponing its return until at least January 2022. Although some of the pandemic’s effects on office occupancy have already occurred, the full impact will continue to play out as leases expire and companies re-evaluate the volume and design of office space they require.

Hospitality. The hotel and travel industry suffered some of COVID-19’s most immediate and devastating financial casualties. Leisure and business travel ground to a near halt, with hotel stays and flight counts falling to once-unimaginable lows. Corporate travel has yet to make a meaningful recovery and remains at a fraction of pre-pandemic levels. Throughout the country, corporations are cutting back on travel budgets as they weigh its costs and health risks against alternatives such as video conferencing.

Business travel and events are unlikely to return to pre-pandemic levels until 2024, according to a recent American Hotel & Lodging Association survey. Although the leisure travel industry benefitted from pent-up demand during the summer of 2021, the Delta variant has undermined that temporary resurgence. And even with the recent increase in leisure travel, airplane traffic is still well below 2019 levels.

These are just a few of the industries that will continue to see COVID-19 weigh down their businesses and property values. Property and business owners should closely review their property tax values to make sure assessments adequately reflect the specific challenges affecting their properties, to include the pandemic’s immediate, ongoing and future financial impact.

New Jersey: Property Taxes – The Most Unfair Tax of Them All

New Jersey’s well-deserved reputation for having the highest tax burden in the nation is driven in large part by its over reliance on property taxes to fund education and other essential services. Polls over the years have shown property taxes to consistently be one of the top issues with New Jersey voters.  Residents and business owners alike often cite high property taxes as the reason they are moving out of the state.  With all of this common knowledge for so long, the question then becomes, how did we get here, and what can be done about it?

One of the biggest problems is that education is funded mainly through residential and commercial property taxes.  New Jersey is one of only a handful of states that still uses this archaic system to fund education.  This means that only property owners are responsible for the lion’s share of footing the bill for education.  For instance, a person with kids in public school who rents an apartment pays minimal through rent, while a retired senior citizen homeowner with no children in school pays approximately a third of their property taxes into funding education.

Moreover, property taxes are based upon market values that appear on paper, without the property owner realizing any tangible financial gain.   Therefore, taxes can go up based on a theoretical increase in assessed value without the benefit of a market transaction and net gain/loss to ground truth any prescribed worth.

Clearly, a strong educational system benefits everyone through increased property values, an educated workforce and desirable, attractive communities.  However, that does not mean that a more equitable system to pay for it cannot be found.

One method that has been considered is dedicating a portion of the state sales tax to funding education.  Under this system, anyone who purchases a taxable product or service is contributing to education, not just those who own property in New Jersey.  This would also have a secondary benefit since lowering property taxes would give New Jerseyeans more disposable income which in turn, would result in increased sales tax revenues.

Thankfully, there is legislation introduced in New Jersey that would change the funding source for education from property taxes to the state sales tax and is currently awaiting committee review.  Hopefully, it will be released from committee in the near future, at which time it will come before the entire Assembly for a floor vote.

With all of the legislation that makes it through the legislature and on to the governor’s desk, it is mind-boggling that something that would be a game-changer for the New Jersey taxpayer has languished without even a committee review.  As such, two things are certain.  One, as long as education is funded mainly through property taxes, New Jersey will always have the highest in the nation and two, unless legislators are held accountable at the ballot box for their inaction, no relief will come to the beleaguered New Jersey taxpayer.

Indiana: Tax appeals involve $200 million worth of real estate

Porter County Assessor Jon Snyder is hiring an expert help to deal with some major commercial property tax appeals. The total assessed value of the properties approaches $200 million. If the county loses the appeals, local governments will have to refund money paid by the property owners, Snyder said. That would impact other taxpayers in the county.

Nexus Group will be paid $225 per hour for legal and appraiser services. “We’re anticipating it to be under $50,000,” Snyder said. The Board of Commissioners approved the contract last week.

Among the properties involved are the Walmart, Tractor Supply, Target, JC Penney, Meijer, Kohl’s, Home Depot, Menards and Thornapple Plaza; Menards and Kohl’s in Portage; and the Save-A-Lot and Dollar General building in Kouts.

Some of the appeals are for a single year and some for multiple years, Snyder said. “They’re looking for a price per square foot different than what we’re willing to settle at,” he said. “This year we’re having a tougher time settling.”

Retailers’ sales last year were affected by COVID-19. Under certain approaches to determining a retail property’s value, income has a direct correlation. Porter County, however, goes by the book. “We use the Indiana cost model as required by state statute,” he said.

Assessing commercial property is different from assessing residential property. Finding comparable homes nearby is easier than finding comparable commercial property nearby, for example, so different rules apply.

The appeals have advanced to the Indiana Board of Tax Review, with hearings possibly held in November. No dates have been set. COVID-19 and hiring a consultant to represent the county have slowed the process, Snyder said. Depending on the outcome of the appeals at that level, the cases could ultimately be appealed to the State Tax Court.

Kansas: Nebraska Furniture Mart could win back $1.5M from KCK in ‘dark store’ battle

Nebraska Furniture Mart, one of the busiest retailers in the region, stands to get a refund on property taxes it paid on its Kansas City, Kansas, location after winning an appeal to a state tax board.

The Kansas Board of Tax Appeals ruled last week that Wyandotte County overestimated the value of Nebraska Furniture Mart’s sprawling location in Village West.

If the board’s decision holds up — the county could appeal the decision in court — Nebraska Furniture Mart stands to collect a nearly $1.5 million refund. That refund would come from the Unified Government of Wyandotte County and Kansas City, Kansas Community College as well as school and library districts in the area. The Unified Government and other taxing jurisdictions use property tax to pay for basic services.

The amount of the refund itself isn’t staggering. But cities and counties in Kansas fear that continued success by big-box retailers in appealing their tax bills could diminish the revenue they collect for basic services and shift the tax burden to small businesses and residents.

“Every taxpayer, whether a homeowner, a small business, or a large corporation, has the right to access the appeal process,” the Unified Government said in a statement. “However, rulings by the Board of Tax Appeals that significantly shift how large commercial properties are valued, will affect how critical services and schools in our community are paid for.”

Retailers on a roll

Indeed, the Nebraska Furniture Mart decision is the latest among several victories by retailers in Kansas that have convinced courts and tax boards that county appraisers miscalculate the value of their properties. They argue that appraisers place too much emphasis on the lease income that a business occupying the retail property generates rather than focusing on how much a buyer is willing to pay for the land and the building on the open market.

In other words, the retailers argue that appraisers should value property as though it is vacant when the new owner takes control of the property. Lawyers for retailers compare it to buying a house: A buyer will pay for the house and the land without regard for whether the seller is financially well-off or struggles to make ends meet.

“We value property on the assumption that the current owner-occupant will vacate, just as you would value a house,” said Linda Terrill, a Johnson County lawyer who is president of the American Property Tax Counsel and frequently represents Kansas retailers in appealing their tax bills. “It’s not dark, abandoned or empty.”

Terrill represented Nebraska Furniture Mart in its appeal, but stressed that she was not speaking about that case while it remains pending.

‘Dark store theory’ looms

Critics of retailers who appeal their taxes call the approach the “dark store theory,” an implication that retailers believe their properties should be evaluated as if they were closed, resulting in lower property values.

The Unified Government said it disagreed with the Board of Tax Appeals decision for relying on a methodology that is not consistent with how commercial property is appraised.

“The NFM building has never been vacant and, because of its desirable location, should not be compared to other vacant buildings,” the Unified Government said in a statement. “The Unified Government only seeks to ensure that all properties, commercial and residential, are valued fairly, so that the tax burden is shared equitable and appropriately.”

Nebraska Furniture Mart, which did not respond to a request for comment on this story, is the first Wyandotte County business to prevail before the Board of Tax Appeals using dark store theory arguments.

But several big-box retailers in Johnson County have been successful in their appeals.

In April, the Kansas Court of Appeals sided with the Board of Tax Appeals in lowering the tax bill for the Bass Pro Shops store in Olathe.

In 2018, an analysis by then-Johnson County Appraiser Paul Welcome concluded that the county, as well as school districts, cities and libraries within it could lose close to $133 million if the dark store theory becomes the dominant methodology for large retailers, according to a story in the Shawnee Mission Post.

Terrill said Kansas courts are applying the law when they arrive at their decisions about tax appeals. She added that cities and counties should press their cases to the Kansas Legislature to make changes to the law.

“The decision of who pays and who shares what portion of taxation is up to the legislature, not the county appraiser,” Terrill said.

Ohio: Hotels, shopping plazas, nursing homes among Summit County applicants seeking lower taxes

At least 29 commercial landlords are asking the county to drop their property values by 10% to 65% to offset revenue lost during the pandemic.

Property owners are filing these special tax complaints with the Summit County Board of Revision, which is already slammed with a record number of homeowners also looking to reduce their property tax bills. The commercial properties — mostly hotels with a few shopping centers, office buildings, department stores and nursing homes — are trying to take advantage of a new state law that took effect last month.

The new pandemic law, a provision of Senate Bill 57, allows any property owner with proof that the pandemic crushed their business to request that their property values, and by extension their tax bills, be lowered to cushion revenue losses tied to the government health orders that limited commerce.

As of Thursday, 29 commercial landlords in Summit County are complaining that the $187.4 million in commercial property they collectively own wouldn’t have sold for $129.1 million just months into the pandemic. The $58.3 million decrease in property valuation they’re seeking would lower their collective property tax bill by $1,748,795, based on an average taxation rate 3% for commercial property owners.

A state law that requires levies to collect as much as they did when passed by voters would force the county to push the tax bill onto other property owners.

The commercial landlords say they lost tenants or couldn’t fill storefronts, office space, nursing home beds and hotel rooms. Most paid more for deep cleaning and safety equipment while watching vacancies rise and revenue drop. While the federal government offered forgivable loans to their tenants and rent relief to their customers, a couple of the commercial landlords applying for relief have fallen behind on their property tax bills.

Some of Ohio’s largest counties are seeing even more filings than in Summit County, where the fiscal office expects more filings through mid-September as applications sent via certified mail will be considered if postmarked by Wednesday.

By the end of business on Wednesday, Cuyahoga County Board of Revision Administrator Ron O’Leary said land owners there had submitted 139 applications. With the exception of one private homeowner, whose case is a “long shot,” O’Leary said the applicants generally lease to or operate hotels, parking garages, shopping plazas or are landlords with vacant retail, office or industrial space.

Cuyahoga is the second most populous county in Ohio. Franklin County, which includes Columbus and is the most populous county, recorded 164 applications a day before the deadline to file. Hamilton County, the third most populous and home to Cincinnati, had 36 owners asking for special tax relief.

While the three largest counties created an e-file system for the special tax complaint forms, Summit County required property owners to deliver them by hand or mail.

How the process works

If applicants ask for a valuation decrease of $50,000 or more, which is the case on every application so far in Summit County, the local school district in that jurisdiction is notified and given 30 days to object. Some school districts, which rely on voters to approve new local funding, draw from levies that would result in a loss of revenue if property values fall.

After school districts weigh in, the hearing process that homeowners and businesses normally follow to challenge their property valuations will then begin, likely in late September or November.

If successful, the board of revisions would use the value of the property as of Oct. 1, 2020 — eight months into the economy-crushing pandemic — instead of the normal Jan. 1 date to set property values.

SB 57 is silent on how long the relief would last. Some property owners and their lawyers say the lower valuation, and lower annual tax bill, should remain in effect until each county conducts its next reappraisal. That won’t cause as much disruption in a county like Cuyahoga, which is reassessing property values this year. But in Summit County, where the fiscal office just reassessed properties in 2020, any lower value could last until after the next three-year reappraisal in 2023, meaning the annual property tax savings for landlords would be tripled.

Proving the pandemic hurt

Lawyers for the property owners say they’ll have no problem proving the economic walloping that hospitality and retail businesses and their landlords took with Ohio’s stay-at-home order and curfew, the capacity-cutting social distancing rules and other pandemic restrictions lifted by Ohio Gov. Mike DeWine this June.

“For some types of property, COVID and the Ohio shutdown orders didn’t really have any effect. For some, it had a dramatic effect,” said attorney Steven R. Gill, who’s representing six Summit County clients collectively asking that their $46 million in property value be cut by a third. The clients include a shopping center on Howe Road in Chapel Hill, a nursing home in Macedonia and two hotels each in Stow and Akron.

No attorney is representing more commercial properties in Summit County, though Gill said he could only speak about any of his individual client’s cases.

“Imagine if you were a nursing home operator and you lost a big percentage of your tenancy,” said Gill, “and you were not able to replace them due to COVID. And you also have additional expenses” associated with state-required cleaning and sanitizing protocols and the purchase or personal protective equipment.

“Imagine if you have a hotel,” Gill continued. “Hotels are measured on three metrics: occupancy, average daily room rate and … revenue per available room. Ask yourself, how many people were staying in hotels between January and Oct. 1? There was little business or personal travel, and many hotels were lucky to stay in business.

“Same thing for restaurants and other retailers who struggled greatly,” he said.

The cases in Summit County

An analysis of the Summit County tax complaints, which list the current and requested valuations, shows that 16 hotels are looking to pay 34% less in property taxes on average. The others, which include three shopping centers, two department stores, two apartment complexes, two nursing homes, two restaurants, an office building and an empty pharmacy, are asking on average for a 25% reduction.

The applications include confidential revenue statements and hotel occupancy rates that offer a rare, unvarnished glimpse at the economic impact of COVID-19 and the public health orders meant to curb its spread.

Dine Global Brands, which franchises International House of Pancakes and Applebee’s locations, disclosed a 23% dip in revenue, or nearly a half a million dollars in sales, for the IHOP on Arlington Road off I-77 in Green.

In the first nine months of 2021, revenue fell 59% and occupancy 52% at the Courtyard by Marriott in downtown Akron’s Northside District. The Hilton Garden Inn in Twinsburg saw revenue and occupancy tumble 53% and 44%, respectively. The Holiday Inn off state Route 18 in Montrose lost 57% revenue with bookings down 46%.

The BLU-Tique Hotel, which opened in downtown Akron shortly before the pandemic began, still isn’t taking reservations for overnight stays.

When 2020 began, a sign at the entrance of Sagamore Square Shopping Center advertised 15 businesses. Only five remained at the plaza on state Route 82 in Northfield by October. One shuttered store that sold party supplies was still on the sign with its name flipped upside down.

The loss of tenants had “a substantial economic impact on the value of the property now and as an ongoing concern,” according to the property owner’s claim for tax relief.

Howe Road was also “drastically affected” by virus-wary consumers and health orders. The owner of more than $9 million of plaza space, including the PetSmart store and the Starbucks/Verizon/Chipotle building, said rent collections suffered as tenants struggled.

Despite the bleak account, there are signs of hope today. All the tenants in question are still in business. Customers streamed in and out on Thursday. And construction workers in the plaza are readying a book store that closed before the pandemic for its new tenant: Harbor Freight Tools.

When the University of Akron emptied its dorms and went online, the demand for off-campus student housing plummeted. Brownstone Apartments, which is seeking about a 30% property tax break, had no students calling for a place to stay.

Low-income apartments at Channelwood Village also suffered, according to a complaint seeking a 10.7% reduction in the property value. Thomas Fuller, the former executive director of the community non-profit developer Alpha Phi Alpha Homes, said a “minority” of tenants misunderstood federal eviction moratoriums to mean that they no longer needed to pay rent.

Though Akron Municipal Court has continued to process evictions throughout the pandemic and no longer adheres to the moratorium since a federal judge in Cleveland struck it down, the 274 affordable apartments where rents have not increased in the past year have accumulated $120,000 in back rent.

Some tenants won’t avail themselves of federal rental assistance administered by Summit County and local non-profit agencies, Fuller said. The request to lower the property’s value by $594,000, if successful, would result in about $18,815 less in annual property taxes, according to a Beacon Journal review of county tax records for the property.

But those savings, which may last for three years, won’t cover all the revenue losses, not to mention the additional cost of setting up employees to work from home or more robust cleaning and safety procedures, Fuller said.

EUROPE

Greece to Further Reduce Uniform Real Estate Property Tax by 8%

The further reduction of the Uniform Real Estate Property Tax (ENFIA) by eight percentage points is still the government’s intention and will be considered for 2022, Finance Minister Christos Staikouras said on Wednesday in an interview with Open TV.

He reiterated that there is the possibility of new cuts in taxes and levies from next year, although this will depend on the course of revenues. In any case, he said, there will be a clear picture in October, when the draft of the new budget will be submitted.

In particular he said that revenues seem up 2 billion euros compared to last year. The performance of industrial production and tourism was good. If this trend continued, due to the turmoil in health worldwide, there will be a better picture of the country’s development in 2021.

“When we have all this data, we will weigh it and submit the draft budget for 2022 on early October. Then we will have a picture for the fiscal space of 2022, so we will have a picture – which we will obviously anticipate at the Thessaloniki International Fair (TIF) – of what possibilities we will have to proceed with further reductions of taxes and contributions,” he said.

United Kingdom: Business rates are a tax on existence, not performance

Entrepreneur Philip Bier, who brought a Danish chain to the UK tells Candice Krieger about physical retail’s continuing struggle and why he’s leading a campaign for reform

The former boss of Tiger UK is ramping up calls for the government to reform the business rates system, which he says is “fundamentally flawed”.

Philip Bier, who brought the Danish chain (now Flying Tiger) to the UK in 2005 believes current rates for physical retailers are damaging the high street, which is plagued with empty sites.

“Fundamentally it’s a tax on existence, not performance,” says Bier. “Business rates are a fixed overhead whereas they should be performance-related. It’s wrong for people to pay whether they succeed or not.”

He continues: “The system is broken and should have ended last century. Why should the state benefit before anyone else? They should be the last to benefit or at same time as shareholders, not before.

“The government should have worked out by now that you can’t have one business paying one lot of tax and others (online businesses) paying different rates.

“Rates have remained high despite what happened in the market. It’s not about not wanting to pay tax, it’s about a tax that is detrimental to the development of this country. Something different needs to be introduced.”

The retail property sector has pinned its hopes on a long-term reform due in the autumn, but Bier is not convinced.

He is part of a committee representing the sector and recently met with Labour leader Sir Keir Starmer to discuss the future of the high street, and earlier this year signed an open letter, drafted by the Tesco CEO Ken Murphy, which was sent to the government calling change.

“The Treasury has promised to do a fundamental review of business rates in the autumn and whether they do remains to be seen.”

Bier, who lives in north London and is a member of Muswell Hill Synagogue, discovered Tiger, which sells quirky lifestyle products at affordable prices, after a trip to Copenhagen, where he was born.

A commercial photographer, he thought it would do well in the UK and re-mortgaged his house to take a 50 percent stake in the company and roll it out on the country’s high streets. The chain grew exponentially and when Bier made a multi-million pound exit in 2017, he had opened more than 40 stores and Tiger Retail had a turnover of £44 million.

Bier, who sits on several retail advisory boards, saw first-hand how business rates impacted Tiger some 10 years ago. “In 2012, there was a shop I didn’t take in Muswell Hill; the rates were the same as the rents and there was no negotiation about it. Rates have become prohibitively high.”

Unsurprisingly, two of his latest projects are online: EyeEye and Sharesy. EyeEye.me is an online-only venture launched together with his friend and fellow photographer, Mark Fluri. The business sells limited-edition, museum-quality black and white prints at affordable prices (they start at £60), mainly from negatives that Fluri has assembled over time.

Bier is also on the board of Sharesy, which launched in June and is a kind of Airbnb for community halls. Founded by Felix Atkin, it lets users book venues around north London for their events.

Through the platform, venues can take control of their earning potential, hiring out their spaces with a hassle-free solution that puts listing, booking, payment and reporting in one place.

Meanwhile, bookers can discover and book affordable venues, simultaneously giving back to their local community.

Bier accepts that the shift to online is “permanent and relentless”. He says the government needs to come up with a strategy to ensure town centres don’t become ghost towns. “Physical retail will never come back to what it was and will struggle with ‘just need’ purchases. Less and less sales are being done in store and we need to address this by what the space should be used for. This is a three-way responsibility between local authorities, the government and private landlords.

“There needs to be a national plan for what empty spaces are used for, such as whether they are turned into community centres with libraries /workshops or for housing.”

So, what will retail look like a year from now? “Low-cost bargain stores and the top end will be fine, but it’s the middle markets that will be hit. The ‘holy cow’ John Lewis is also coming into question. It used to be aspirational, but I don’t think it’s somewhere my son (age 23) would shop. They have lost the next generation – people under 35.”

He adds: “Retailers need to make the experience of going into store something you want to do. There has to be really good customer service and give consumers something they can’t get online, whether that means a ‘hello’ or ‘goodbye’, or simply a smile.”

United Kingdom: Business rates “should be revalued every year”, property sector says

The UK property sector has called on the government to revalue business rates every year in a bid to support the recovery of high streets and town and city centres following the pandemic.

The British Property Federation (BPF) said fundamental business rates reform is “long overdue”, ahead of the end of the government’s revaluations consultation today.

The consultation is considering proposals which would introduce three-yearly revaluations, compared with the current five-year gap between assessments.

However, current business rates valuations are based on figures from 2015 and are not set to be changed until 2023 after the latest update was pushed back by a series of delays, including the impact of Covid-19.

In its submission to the consultation, the BPF said the current property tax system is “broken” and has “failed to respond to significant changes in the UK economy”.

Rental prices in the retail property sector have plunged in recent years, dropping by around 50 per cent outside London in real terms over the past 10 years.

However, business rates bills have continued to rise, partly caused by the long periods between revaluations.

The BPF said the government should push ahead with the proposals to reduce the revaluation period as part of a road map to annual changes in the tax.

The organisation said reform of rates should also set the business rates multiplier at a fairer level and make improvements to the appeals process.

“The business rates system is undermining town centre recovery and poses a significant risk to the future of our high street businesses,” chief executive Melanie Leech said.

“Business rates have become so unaffordable, they are now hampering town centres’ ability to adapt, modernise and thrive.

“We welcome this first step to increase frequency and transparency of revaluations, but the Government must recognise it is only the beginning of the journey to create a more sustainable and fairer system.

“We need annual revaluations and transparency over how valuations are determined; more frequent revaluations is only one piece to the jigsaw.”

Authors:

  • Paul SandersonPresident | psanderson[at]ipti.org
  • Jerry GradChief Executive Officer | jgrad[at]ipti.org
  • Carlos ResendesDirector | cresendes[at]ipti.org

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