The Scottish Conservatives have found that Derek Mackay’s failure to link non-domestic rates to CPI, instead of RPI, will add £396 to taxes for the average Scottish shop by 2020.
The figures show that the average shop would pay £15,594.50 in 2020/21 if RPI is used to inflate poundage and £15,198.54 if CPI is used to inflate poundage – leading to a penalty of £395.96.
Both the Consumer Prices Index (CPI) and the Retail Prices Index (RPI) measure inflation.
Each aim to measure the changes in the cost of buying a 'basket' of products, but they cover different items and differences in formulae used to calculate the inflation rate mean that CPI is often lower than RPI.
The Chancellor announced in the Autumn Budget that increases in non-domestic rates in England would be linked to CPI from April 2018, two years earlier than originally intended.
In addition, the Barclay Review said that “CPI is widely thought of as a better measure of the overall levels of inflation in an economy than RPI is”.
The review recommended that the change to the lower measure of inflation, which would cut taxes by up to £40 million a year by 2020 across Scotland, should happen at the same time as the change occurring in England.
Commenting Scottish Conservative shadow finance secretary Murdo Fraser said:
“These figures confirm that Scottish businesses will be penalised by £400 per year by the finance secretary if he fails to change the linkage from RPI to CPI.
“Businesses are rightly worried about the future. They are all too aware of the damaging effects on their businesses of slow economic growth and price increases.
“Business groups are actively calling for this change yet Derek Mackay continues with his damaging agenda of unnecessarily high tax rates.
“The Scottish Government must follow the Chancellor’s lead and change the linkage.
“The Scottish Conservatives wholeheartedly support non-domestic rates parity with England, and a switch from RPI to CPI indexation.
“The Scottish Conservatives will continue to stand up for businesses and campaign to keep the tax burden as low as possible in order to revitalise our economy.”