Business rates should be frozen for two years ahead of a root-and-branch reform, according to the British Chamber of Commerce (BCC), which branded the current system as "iniquitous" and "broken".
In its submission to next month's Autumn Statement, the BCC called on chancellor George Osborne to freeze business rates for the next two financial years. While the BCC conceded the move would cost the government £1.7bn, it said it was only equivalent to 0.1 per cent of overall government spending and said it could be recouped from a £11.5bn underspend last year.
It also lobbied Osborne to consider a new, fairer system for UK businesses, which could take into account varying businesses' needs.
"The government should conduct a comprehensive review of the business rates system by 2015, so that a new, more responsive system can be enacted early in the next parliament," it said.
"The new system should be fair for businesses across the UK, flexible enough to respond to changes in the economic cycle and defined according to an appropriate measure of business costs."
UK businesses face paying an extra £900m on business rates next year if the government hikes the rates in line with inflation, according to the BCC, which said it would be at odds with the government's pro-business rhetoric.
Last week 94 per cent of respondents to a Forum of Private Business (FPB) survey said business costs have increased, with 41 per cent of SMB bosses saying they could not pass rising costs on and faced slashing their own costs to keep prices stable. FPB head of policy Alexander Jackman also called for a freeze in business rates.
According to the BCC, the business rates system is broken.
"This is a tax that hits companies of all sizes long before they a make profit, and acts as a drag on business growth and investment," it said. "Firms across the UK have been crying out for relief from these burdensome taxes for years, but so far their pleas have been ignored.
"It is cynical to freeze council tax while allowing the pain caused by business rates to continue, and goes against pro-business pledges made by the government. The cost of spiralling business rate bills is without doubt the most commonly cited issue facing firms' ability to grow.
"There is no question that the business rates system is broken."
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