Center for Policy Research
Property Tax Web Series
Tax and Occupancy of Business Properties: Theory and Evidence from UK Business Rates
Ben Lockwood, Martin Simmler, Eddy Tam
February 2022
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Abstract
We study the impact of commercial property taxation on vacancy rates in the UK using regression kink and regression discontinuity designs. We exploit exogenous variations in commercial property tax rates from three different reliefs in the UK business rates system: small business rate relief (SBRR), retail relief and empty property exemption.
A simple theoretical framework predicts: (i) relationships between rateable values and taxes, and vacancies; (ii) that SBRR has a sorting effect on the mix of businesses in small properties.
Findings consistent with the theory suggest that SBRR increases the likelihood that a property is occupied by a small business, reduces the likelihood that it is occupied by a large business, and reduces the overall likelihood of being vacant. We estimate that the retail relief reduces vacancies by 90%, and SBRR relief by up to 54%.
This paper was presented by Martin Simmler on February 4, 2022 as part of the 2021-2022 Syracuse Webinar Series on Property Tax Administration and Design.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.