This land value tax would be levied on landlords, delivering a potential tax cut for hundreds of thousands of small businesses which rent premises.
A separate package of measures will be included in the budget to provide more short-term relief, the newspaper reported.
The tax brings in about £30bn a year, making it the sixth biggest contributor to Treasury coffers, and is viewed by the government as easy to collect and hard to avoid. Rates have also become an increasingly important source of funding for local authorities.
Meanwhile, thousands of small businesses which have been “hammered” by rocketing bills have called for business rates to be overhauled.
The letter has been signed by 11 so-called business improvement districts (BID), which raise and inject cash back into high streets, towns and city centres.
Chris Turner, chief executive of British BIDs, wrote: “While our economy rightfully evolves, high-street retailers and other businesses are struggling with competition from online retailers, and sadly this has resulted in many [sites] closing – for good.
“We would like you to work urgently to level the playing field … with a fair and transparent digital tax.”