The Scottish Government been told it could "turbo charge" economic growth by reforming the "unfair" tax regime penalising hospitality businesses.
The Scottish Hospitality Group (SHG) said changing antiquated business rates rules would help create jobs and boost investment in struggling high streets.
It argues that bars, restaurants and cafes often pay substantially more in business rates than other sectors, reducing the amount of money available to expand and invest.
“If a new tax strategy is to achieve a tax system that works for everyone in Scotland, it must have fairness at its core,” the industry body has told MSPs.
“That means ensuring businesses and sectors operating in the same space are treated equally by the tax system, which is not currently the case."
'Unfairness'
The hospitality industry currently pays business rates based on the turnover of their business, while retailers pay business rates based on the square footage of their premises.
SHG added: "In practice, this often results in businesses of a similar size and in an immediate proximity paying vastly different rates, with hospitality businesses often paying a far larger percent in rates compared to other sectors, even though the sector in most cases employs more people per square footage, than retail.
“This unfairness is further compounded by the fact the existing system takes no account of the profitability of a business when calculating its rates. This means that hospitality businesses are treated unfairly compared to other sectors, a discrepancy the new tax strategy should seek to address.”
Pubic support
Polling by Survation on behalf of the consultancy firm True North shows a majority of Scots (around 60%) support reforming the non-domestic rates system to provide parity across all sectors. Survation interviewed 1,015 Scots aged 16 or over between July 29 and August 2.
The SHG said addressing the “existing unfairness” in the tax system could support the hospitality industry to create more jobs, boost investment in training and skills, and expand its operations.
“Given hospitality is increasingly the mainstay of both urban town centres and rural communities, a tax strategy that supported the sector would also help increase investment in the high street and other underserved areas,” it said in a written submission to Holyrood’s finance committee.
“All of this would help contribute to economic growth, improving the Scottish Government’s overall tax take, and help to create higher-skill jobs and better living standards for Scotland’s people.”
Government response
A Scottish Government spokesman said: “The valuation of all non-domestic property is a matter for the independent Scottish Assessors who determine all premises' rateable values, including hospitality properties, based on the notional rental value that it could be expected to attract on the open market if it were vacant and to let.
“The 2024/25 Scottish Budget delivers a competitive non-domestic rates regime including the lowest poundage in the UK for the sixth year in a row, and a package of reliefs worth an estimated £685 million.
"This year hospitality businesses on Scotland’s islands are eligible for up to 100 per cent relief from rates, and our Small Business Bonus Scheme remains the most generous of its kind in the UK.
"Decisions on non-domestic rates for next year will be considered in the context of the Scottish Budget 2025/26.”