Council tax replacement options tabled

Glasgow City Chambers
By Robert Outram, The CA magazine

15 December 2015

Three options for replacing council tax are put forward by the commission examining local taxation in Scotland.

Council tax in Scotland should be replaced by a fairer, more progressive form of local taxation - that is the main conclusion of the Commission on Local Tax Reform, in its report published yesterday (Monday).

The commission has offered alternative models but says that the choice between them is a political decision that should debated as part of the campaign for the Scottish Parliament elections next year.

The report, Just Change, sets out three options for local taxation in Scotland:

  • A replacement property tax based on the value of land and buildings.
  • A land value tax based on the value of land only.
  • A local income tax.

The report states, however: "The predominant view of the commission is that local government's tax base should, if it could be proved feasible, be broadened to include income.

“Income is widely perceived to be a fairer basis on which to levy a tax, although a locally variable income tax presents substantial administrative challenges."

Not least of the challenges is that local authorities would be able to set their own rate of tax, so tax collection authorities, taxpayers and employers would have to deal with multiple rates of taxation depending on the rate set by the local authority.

Another issue is that, if collected on the same basis as the Scottish Rate of Income Tax (SRIT), dividend income would be excluded.

The commission takes the view that the status quo is untenable in the long run, with householders in the highest bands paying only three times that of the lowest, even though their value, or average, is worth around 15 times as much.

We will consider the findings of the report carefully and we will set out our detailed proposals for reform by the end of the parliamentary term. (Local Government Minister Marco Biagi)

Currently the Scottish Government has imposed a council tax freeze, supporting councils with additional central funds, but this cannot continue indefinitely, the report says. The report also points out that the current council tax is based on property valuations from 1991.

The commission also considered raising revenue through charging for services but the report argues: “The most vulnerable in society, in the need of the most support, would bear the cost of the services they need. Such a scenario would be cause for concern because their need to use particular services is not related to their ability to pay for them.”

Council tax in Scotland raises around £2bn annually. It is a highly visible tax, but this represents only 12 per cent of local government revenues, with the majority of funding coming from the Scottish Government.

Minister for Local Government, Marco Biagi,  said: "We will consider the findings of the report carefully and we will set out our detailed proposals for reform by the end of the parliamentary term, embodying the principles of the commission's report."

Scottish Labour spokeswoman Jackie Baillie said: "This is a comprehensive report that looks at a number of different options… The challenge for all political parties now is to consider these options and come forward with their solution to put to the electorate next year."


  • Accountancy

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