When is a tax not a tax? When it's a levy?

February 03, 2015 10:18 AM

There is a new term coming into use with worrying regularity.  Local authorities, finding it politically difficult to raise council taxes, are increasingly turning to either increasing service charges or seeking to impose backdoor taxation as a “levy”.

In my hometown of Dover there are regular calls for a levy to be imposed on every vehicle and passenger passing through the port.  This would be in addition to existing port dues and the central government imposed HGV levy (not quite the same thing).  Basically, the port as a profitable enterprise is seen as a source of additional income for councils – to be “milked”.  I wonder, should things go wrong and the port ever make a loss, if they would be prepared to reciprocate? – I doubt it.

News has recently come from the city of Oxford that not one but two arbitrary levies are being proposed.  The first is a £1 charge on every hotel bed in the city.  Hoteliers fear for the wellbeing of Oxford’s tourism.  The second is to follow Nottingham’s example and impose a levy on workplace parking spaces – referred to by some as a “tax on going to work”.

This trend needs watching, lest our councils turn into latter-day Sheriffs of Nottingham.

In Canterbury, there is a slightly different situation (part 2).  City councillors and some traders (mainly small independent ones) have clashed over the city’s Business Improvement District (BID).  The Canterbury Independent Traders’ Alliance (CITA) claim the changes the BID had made in the months since being created were “superficial” and had “not increased footfall in the city centre”.  The BID say they will do more and need to be given a chance.  They also say the scheme was set up after a democratic vote of traders and those who object must accept democracy and pay up.  The BID in Canterbury charges businesses in the city centre an additional 1.5 per cent business rate (worth a total of about £500,000 a year) in exchange for a range of services to make the area more attractive, such as floral displays and extra street cleaning.  The most visible of these so far have been the city’s Christmas lights, cancelled in 2013 due to a lack of funding but brought back in 2014 thanks to BID money.  But some traders, in side streets left with sparse or no lights, are unhappy and regard it as simply another tax on businesses. A number of traders have, however, spoken in favour of BID.

The Canterbury scheme requires payment up front with little opportunity to pay by instalment. The mandatory payment was introduced in October following a vote among traders. After a two-year consultation the turnout was 54 per cent (of 704 eligible) out of which 64 per cent voted in favour, a minority of the overall total.  CITA claim that many non-voters didn’t want to know, not realising the levy would be mandatory on all.  Matters came to a head in January when 50 non-payers were issued with court summonses, which means feelings are running high.  According to independent trader Debbie Barwick of CITA, interviewed by myself for this article, they intend to push for staggered payments, but a hard core of 4 are refusing to pay and prepared to go to court.

The BID scheme runs for 5 years, when there will be another vote.  Their Chief Executive and 2 staff take £100,000 a year (about 20 per cent) in wages.  They promise to spend on four core areas of improvement: promoting Canterbury as a “brand” through targeted marketing and investing in events and festivals; making the city a “superb destination” removing graffiti and providing uniformed ambassadors to greet visitors; promoting as a centre for business; setting up working groups to provide a collective voice between businesses and other bodies.

There are BID schemes working in other cities, most successfully – though there are other groups against them.  If businesses want to voluntarily chip in to improve the looks of their places, that’s great, and nobody’s business but theirs.  When it becomes new taxation – mandatory on everyone, with people being taken to court, it’s another matter.  We need to proceed with caution.

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