ICAS response to commission on local tax reform

ICAS makes its submission to the Commission examining local tax reform in Scotland.

ICAS has submitted its views to the Commission on Local Tax Reform in Scotland and this article focuses on key aspects of the consultation response.

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Is the current system broken?

ICAS put forward a number of points. First, it is important that the review, or any resultant changes, do not affect the relative certainty of the £2bn of revenue currently generated by the existing council tax arrangements. Moreover, this background needs to be carefully considered as part of a risk and impact assessment as the capacity of the current system to implement change and bear any shocks or associated risks is likely to be more limited.

Local taxes should be evaluated as a part of the devolution of powers and taxes

Scotland is in a period of unprecedented change around the devolution of powers, including some taxes to Scotland and community empowerment. ICAS has said that a review of local taxation should form part of a more holistic exercise that considers the wider context of strategic change, local government funding and tax, to give a clearer perspective of current and projected priorities, needs and challenges.

A useful step would be for the Commission to take the time to establish a robust and wide-ranging evidence base for recommendations on a direction of travel which ensures that there is room in any conclusions to adapt to different circumstances arising from the Smith Commission and other reforms.

What is the purpose of local taxes?

The ICAS response noted that the statutory powers and purpose of local taxation need to be defined and clear principles articulated to provide a framework for setting direction and assessing options.


There is need for, and potential to improve, the transparency and accountability of local authorities in terms of how resources (including council tax) are used and how well the authorities performs. There is a complicated landscape of funding, services and responsibilities split between central and local government. Taxpayers need a clearer picture of what they are paying for. This includes improved clarity on where councils are complying with statutory levels of service and where they exercise discretion.

We are concerned that local authority financial statements do not give a clear picture of the true cost of providing services. This is not in the public interest. We recommend that the statutory framework which conflates the council tax calculation and accounting purpose of financial statements is amended to remove this barrier to simpler and more understandable accounts. This would help to increase the transparency of the performance of local government.

Fairness and key principles

The remit of the Commission identifies the objective of a fairer system of local taxation. Further articulation of what the Scottish Government means by 'fairer' would help to base a future assessment of options.

ICAS has noted that there are a number of key principles that could be used to assess options:

  • Proportionate, reflecting ability to pay;
  • Simple to understand and transparent;
  • High collection rates, predictable revenues and difficult to avoid;
  • Clear accountability which connects decision making and spending of public funds with taxes raised;
  • Cost effective to administer;
  • A broad but balanced tax base to make a contribution to the costs of government, and to support broad accountability and voter representation;
  • Value for money and best value, including the way in which revenue is raised i.e a duty to be neither profligate in the spending of public funds nor in the raising of tax revenues;
  • Stable and predictable revenues;
  • Aligned with current, not historic, needs and priorities;
  • A basket of taxes to minimise overloading one form of tax with the risk that it can reduce incentive to pay, as identified by the Laffer Curve.

In summary

In terms of options for local taxation, this is an area of judgement and different ideological perspectives, so rather than being able to conclude on an objective basis at this point, we hope the Commission sees its role as investing in the groundwork to enable a more objective assessment to be formed. It would be useful to be informed by international comparisons of what works elsewhere. Any change, regardless of preference, will require robust evidence and modelling of impacts as well as a suitable transition period to minimise the extent of any potential negative consequences for taxpayers, particularly in the current economic climate.


  • Public sector
  • Consultations and responses
  • Tax

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