The current system of business rates is not fit for purpose and needs to be fundamentally reformed, says the Business, Innovation and Skills Committee in a report published this week.

The Committee calls for a wholesale review that goes beyond the administration of business rates to examine whether retail taxes should be based on sales rather than the rateable value of a property; whether retail needs its own system of business taxation; and how frequently revaluations should take place.

In the interim, the Committee calls for a six months business rates amnesty for businesses occupying empty properties. This would go further than the 50% reduction announced in the Autumn Statement and would encourage new businesses to the High Street.

The Committee also recommends that in the interim the Government review whether business rates are more appropriately linked to CPI or RPI and calls for annual increases to be linked to a 12 month average of either RPI or CPI, with a cap at 2%. This would replace the current link to a monthly snapshot of RPI.

Clive Betts, Chair of the Communities and Local Government Committee, welcomed the report, and called for a wholesale review of business rates.

“Any review must, however, take account of the vital part business rates play in financing local authorities. Local authorities must play a full part in the review,” he stressed.

"The Government’s business rate retention scheme is intended not only to drive local economic development, but give local authorities greater control over locally raised resources. Without business rates, or an equivalent replacement tax, paid to local authorities it is difficult to see how the Government’s policy of localism can prosper.

"My Committee is currently examining whether cities should be given greater control over tax and spending. Business rates are central to such proposals. We shall take the BIS Committee’s conclusions into account."