The government should tighten the definition of a charity shop, according to MPs on the Business, Innovation and Skills Committee.
A report called The Retail Sector, published this week, says the 80 per cent business rate relief that charities receive has "loopholes that can be abused by businesses purporting to be charities".
It says the "blanket reduction also has the potential for charities to threaten other shops, especially bookshops, which have to pay the full amount of business rates. The government needs to outline tighter definitions on what constitutes a charity shop and report on its findings by autumn."
Overall, the committee says, the current system of business rates is not fit for purpose and should be fundamentally reformed.
The committee’s report does not suggest what the tighter definition of a charity shop should be.
It includes details from an evidence session with Meryl Halls, head of membership services at the Booksellers Association, the membership body for booksellers, who told the committee: "I put charity shops on my list of concerns for bookshops, because Oxfam actually has more outlets selling books than Waterstones, and it is benefiting from a fantastic range of relief."
It also refers to evidence from Bill Grimsey, the businessman who ran Wickes and Iceland and author of the Grimsey Review: an Alternative Future for the High Street, written in response to the government-commissioned review of the high street carried out by the retail consultant Mary Portas.
Grimsey told the committee that his own venture, the chain Focus DIY, turned its empty premises into charity shops for two out of every six weeks to avoid paying full business rates. "There are loopholes and the charity one needs buttoning up a bit, because it has allowed charities to morph into retail chains and it has allowed landlords to exploit other charities to get rate relief," he said in evidence to the committee.
The report says Brandon Lewis, the Conservative MP for Great Yarmouth and a minister at the Department for Communities and Local Government, had a different view and said it was right to give advantages and discounts to charity shops.
Lewis told the committee: "I think we undervalue charity shops. In some areas, they get quite bad press when, in reality, they can be a huge part in bringing footfall back to high streets." He said some shops had become community hubs where people could meet, the report says.
In response to the report, Warren Alexander, chief executive of the Charity Retail Association, said: "The association does not support the committee’s recommendation to tighten the definition of charity shops.
"The definition of a charity shop is very clear in the legislation, which says that you must be a registered charity occupying the premises and using the premises to sell wholly or mainly donated items, with the profit donated back to the charity in order to claim rate relief.
"We would condemn any private businesses that are pretending to be charities and claiming rate relief illegitimately and would support action to better enforcement. However, because this is already illegal, actively changing the rules would not make any difference."
He said the CRA was disappointed that the report said charity shops "threaten" other shops because evidence showed that not to be the case.
A report commissioned by the CRA found there was no evidence to suggest the growth in charity shops was causing or facilitating the decline of high streets.