NATIONAL calls for a reform of business rates have been echoed in York as a fairer deal is sought for small firms.

A group of MPs sitting on the Business, Innovation and Skills Committee has released a report stating business rates are in need of “fundamental reform” as the current property value based tax is “no longer fit for purpose”.

The committee focused particularly on tax charged to retailers, asking whether tax should be based on the value of sales instead of being based on the value of their shop.

The leader of City of York Council, Coun James Alexander, has backed the calls for a reform with rates based on profit.

He said: “Business rates are set by Government and the council simply collects it on its behalf. We send £40 million a year more to London from business rates than we get back in funding. I think it’s about time there was a review of business rates. Given that it’s based on property value it’s often very unfair in terms of how much businesses pay, especially small businesses. It should be based on profit.”

Rachel Goddard, chairwoman of York Professionals and managing director of Intandem Communications, said: “It would certainly appear to be more sensible if business rates reflected the level of income of a business rather than the size or location of a property.

“As business evolves and becomes more online based it is vital we retain the vibrancy of the high street and do not make it unaffordable for any business, retail or otherwise, to ‘set up shop’. A review of business rates is a good idea.”

Frank Wood, chairman of York Retail Forum, said the current system was unfair but felt it could be mitigated by introducing other measures.

He said: “It’s an unfair system as it doesn’t take into account different types of business, or the ability to pay. However I don’t see how they can do it another way. You could base it on profit, or turnover, but to implement that and monitor it would be very hard, and very expensive.

“An overhaul of the rates system could be expensive to implement. However, businesses could be supported by rate relief. Perhaps that could be based on turnover or profit of small businesses.

“We want to be encouraging small businesses as much as possible.”

Also calling for a reform is Susie Cawood, head of the York and North Yorkshire Chamber of Commerce. She said: "The business rates system is an iniquitous tax that is liable irrespective of company profitability and in need of fundamental reform.

"We would agree with comments that a system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.

"There are other measures the local authority could take to address declining high street sales, for example city centre car parking charges and keeping Lendal Bridge open to cars.

"Businesses in Britain still pay far more in property taxes than their counterparts in countries like Germany and France, which undercuts the government's stated aim of maximum tax competitiveness."