The Charity Finance Group has urged the Welsh government to reject proposals to reduce business rate relief for charity shops.
Responding to a Welsh government consultation called Business Rate Relief for Charities, Social Enterprises and Credit Unions, which closed on Friday, CFG said it was disappointing that the report focused on the perceived negative impact of charity shops on high streets.
The consultation contains 10 recommendations made by a group led by Brian Morgan, professor of entrepreneurship at Cardiff Metropolitan University, including one that rate relief for charity shops in Wales should be reduced from 80 to 50 per cent from 2022.
It includes recommendations, which it says should be phased in from next year, for new thresholds for charity shop rate relief to limit the relief for charity shops that occupy premises of higher rateable values. Ot also recommends that ‘zoning’ or limiting the number of charity shops in an area should be done at local authority level.
CFG’s response to the consultation says that the majority of measures in the report will do little to address the need to stimulate economic growth and address the decline of high streets.
"The report lacks evidence to support the criticisms of charity shops, and the assumptions underpinning the report demonstrate a lack of understanding of the charity sector and, particularly, the underlying rationale for charity tax reliefs," it says.
The CFG response says that it shares concerns that the recommendations about reducing rate relief for charity shops would reduce charity shop income, lead to closures and, ultimately, reduce support for beneficiaries.
"Charity trading income has increased steadily in recent years against a backdrop of increased demand and a decline in other income sources," the CFG response says. "The further cuts to local authorities, announced in the latest spending round, will further exacerbate this position."
The CFG says the report fails to acknowledge why charities are granted rate relief, which it says is in recognition of the role of charities in delivering public benefit.
"The report implies that the relative success of charity shops justifies a reduction in business rate relief. Tax reliefs are not granted on the basis that they correct commercial underperformance – therefore the position the report takes is fundamentally flawed."
The CRA has long opposed the proposals. In its response to the consultation, the association reiterated its concerns about the impact of the recommendations on reducing business rate relief for charity shops.
"There is an absence of evidence in the report to support its assumptions, most importantly the assertion that charity shops create problems on the high street and are responsible for market distortions," the response says.