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Tax and Occupancy of Business Properties : Theory and Evidence from UK Business Rates

Author

Listed:
  • Lockwood, Ben

    (University of Warwick and Oxford University Centre for Business Taxation)

  • Simmler, Martin

    (Oxford University Centre for Business Taxation and Thuenen Institute of Rural Economics)

  • Tam, Eddy H.F.

    (King's College London and Oxford University Centre for Business Taxation)

Abstract

We study the impact of commercial property taxation on vacancy rates and rents in the UK, using a new data-set, and exploiting exogenous variations in property tax rates from reliefs in the UK system: small business rate relief (SBRR), retail relief and empty property relief. We estimate that the retail relief reduces vacancies by 85%, and SBRR relief by up to 49%, while empty property exemption increases them by up to 89%. The effect of retail relief on clusters of urban properties (the "High St") is no different to its overall effect. SBRR increases (decreases) the likelihood that a property is occupied by a small (large) business. We also use data on asking prices for rental properties to study the effect of reliefs on rental rates. Rental rates move in the opposite direction to vacancy rates, except in the case of empty property relief. All these findings are consistent with a novel model of directed search in the commercial property market, also presented in the paper.

Suggested Citation

  • Lockwood, Ben & Simmler, Martin & Tam, Eddy H.F., 2022. "Tax and Occupancy of Business Properties : Theory and Evidence from UK Business Rates," The Warwick Economics Research Paper Series (TWERPS) 1439, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1439
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2022/twerp_1439_-_lockwood.pdf
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    References listed on IDEAS

    as
    1. David Card & Andrew Johnston & Pauline Leung & Alexandre Mas & Zhuan Pei, 2015. "The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013," American Economic Review, American Economic Association, vol. 105(5), pages 126-130, May.
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    3. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 467-491.
    4. Danielle C. Sanderson & Victoria M. Edwards, 2014. "What Tenants Want: UK occupiers' requirements when renting commercial property and strategic implications for landlords," Real Estate & Planning Working Papers rep-wp2014-03, Henley Business School, University of Reading.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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