Local tax commission: replacing council tax

[renton]

So the cross party (apart from the Tories) commission has published it's final report, as you'd expect for a cross party communique it's equal parts verbose and vague. the report can be found here: http://localtaxcommission.scot/download-our-final-report/

The conclusions seem to be that the council tax replacement must be 'more progressive', I suppose the unique selling point of this commisison as opposed to previous attempts is that they are not proposing replacing CT with another, single tax - but instead believe tax should be raised from multiple revenue streams:

"In contrast with previous attempts at reform, we are not persuaded that a single tax
instrument can simultaneously deliver greater equity for taxpayers and autonomy for
Local Government whilst also being efficient and readily implementable. A replacement
system, therefore, would benefit from including multiple forms of tax which would allow
local taxation as a whole to be fairer. A well-designed system that draws revenue from
multiple sources would provide more options for local democracy, delivering greater
financial accountability and autonomy to Local Government. A broadening of the local
authority tax base would be advantageous, and would make Scotland more consistent
with most OECD countries.."

Meanwhile, they conclude that the value of property must still form part of the tax, and have modelled a couple of different reforms - either reworking the CT bands, or changing to a tax on capital values which they would then combine with some form of local income based tax.

"The predominant view of the Commission is that any reform of local tax has to continue
to include recurrent tax on domestic property, and we recognise that, as with all
available options, there are difficulties that must be addressed if any system is to
be seen as fair and accepted by the public. We have modelled two approaches – a
reformed, proportionate Council Tax and a progressive tax on capital values – but we
repeat these are both simply illustrations. At the very least, any such system needs to
be more progressive than the Council Tax. This should occur through making the initial
household liabilities more progressive and by creating an extensive income based relief
that also takes account of need, and is better for households on low and precarious
incomes than the existing Council Tax Reduction scheme. The substantial political
challenge of linking liabilities to up-to-date property values must also be overcome."

In other words, there is a fairly conservative (small c) route forward where you change as few apsects of the current system as possible, where you could keep CT as it is, but tweak the bands, and combine with a local income tax. That makes sense on technical grounds, it allows much more flexibility for local government in terms of generating revenue, and is easier to implement - it makes more poltiical sense for anyone trying to implement it: less radical, easier to get by - breaking it down into multiple smaller taxes also has the effec tof muddying the 'winners vs losers' debate, making it harder to lobby an effective opposition to it.

unfortunately the tone towards an LVT is a bit grimmer, damned with faint praise despite Andy Wightman's considerable arguments, it is kept open as a future revenue stream (and breaking the existing CT into a more modular format at least grants that flexibility) after 'more work and thought' is put into how it is implemented - i.e. kicked into the long grass for being a wee bit too controversial.

"We believe that a system of land value tax is promising, but that, while the work done
for the Commission has been of unprecedented scale, gaining a full understanding of
its impact would require further analysis. Any system of administering property based
taxation should provide sufficient flexibility in time that site values could form a tax
base for a system of land value taxation. Further work should be done over the next
parliamentary term to assess both general and targeted land value taxes, and their
introduction should be given consideration as part of a broadened system of local
taxation."

Still, even a more conservative approach of combining a reformed CT band system with a local income tax is subject to asking HMRC and Westminster nicely:

"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. Progressing such a longer-term
programme of reform would require early dialogue with the UK Government to ascertain
their willingness to allow the use of HMRC to apply a locally variable rate of income tax
and to calculate start up and ongoing collection costs, as well as testing the scope to
include income from savings and investments. A system of assigning local authorities
a share of receipts from the SRIT could provide an interim option, but this would not
allow for local variations.21"

So, for me, the commission's major conclusion is to put to bed the idea of a singular replacement system, instead opting for a modular design where the equivalent tax is raised from several smaller streams which can be tailored to be more progressive (or regressive if you were that way inclined). Other than that, LVT is effectively kicked into the long grass with a 'wait and see' approach. The Greens will no doubt push LVT, but the SNP will likely go with a local income tax + reformed CT type system (they had previously mooted a local income tax, after all), the Tories will claim the system is fine as is, and simply demand that the freeze is lifted, no one give a shit what the Lib Dems think, which leaves only Labour - not sure which way they'll jump. Finally, it's instructive to note that even a relatively conservative change like adding a local income tax to the system would require significant buy in from Westminster and HMRC over what should be a devolved issue.

[ICTChris]

Poll tax to return IMO.

[Granny Danger]

I hope there's not a proposal that will be unworkable because it will require UK government approval with every likliehood of such approval being either at worst refused or at best coming after a lengthy delay.

The existing SNP government have kept their election pledge on the Council tax but I feel it was a very weak position. Whilst there are flaws in the present system I would have preferred to see rises each year rather than cuts in local services.

[invergowrie arab]

I hope there's not a proposal that will be unworkable because it will require UK government approval with every likliehood of such approval being either at worst refused or at best coming after a lengthy delay.

The existing SNP government have kept their election pledge on the Council tax but I feel it was a very weak position. Whilst there are flaws in the present system I would have preferred to see rises each year rather than cuts in local services.

Council tax would have had to rise an incredible amount each year to to address any cuts in local services and the "shortfall" has been overfunded by Holyrood in any case.

I would like to see a local income tax and land value tax offset by a reduction in income tax going to the UK treasury to ensure more tax raised and spent locally and also a serious look at local democratic structures as part of that.

Unfortunately within the UK that seems entirely unworkable and even in Indy Scotland I'm unsure what the political appetite for that would be.

My main criticism of Council tax is that it inequitable and nowhere near progressive enough.

[Granny Danger]

Council tax would have had to rise an incredible amount each year to to address any cuts in local services and the "shortfall" has been overfunded by Holyrood in any case.

I would like to see a local income tax and land value tax offset by a reduction in income tax going to the UK treasury to ensure more tax raised and spent locally and also a serious look at local democratic structures as part of that.

Unfortunately within the UK that seems entirely unworkable and even in Indy Scotland I'm unsure what the political appetite for that would be.

My main criticism of Council tax is that it inequitable and nowhere near progressive enough.

I dont buy the arguement that local authorities have been sufficiently compensated by Holyrood, it should also be recognised that any additional funding Holyrood is giving to local authorities is money that is not being spent on other services.

The bottom line is that the Council Tax freeze means that collectively we have been paying less than we otherwise would have been paying and that is something that has had a benefit to those who could afford to pay more; those that can't are already covered by exeptions.

Of course the Council tax is inequitable and not progressive, that's why it's disappointing that nothing has been done about it during the course of this parliament.

[Dunning1874]

I still see LVT as the only fair solution, but that does suggest we won't be seeing it any time in the next 6 years at the very least. If the only reform we get after freezing it for eight years because it's unfair is Local Income Tax on top of the system as it is then it's been a massive waste of time, frankly.

[renton]

I still see LVT as the only fair solution, but that does suggest we won't be seeing it any time in the next 6 years at the very least. If the only reform we get after freezing it for eight years because it's unfair is Local Income Tax on top of the system as it is then it's been a massive waste of time, frankly.

I agree with you entirely regarding LVT (not just in terms of the local tax, but it's also the only sure way to stop folk avoiding tax who'd otherwise flee to the English tax base if you tried to put the 50p tax rate back in). Nevertheless, a re-jigged CT band rate alongside a local income tax - assumng HMRC play ball - is still a much more flexible, and potentially more progressive system than trying to just do one or the other. It is still fairly conservative, but it's almost certainly what the SNP will plump for, a further freeze is simply untenable both practically and politically, and a hybrid system offers greater degrees of progressive taxation while not being all that different, which will appeal to the likes of Swinney. Ultimately radical change will only happen as fast as the growth of parties interested in those ends. The SNP, as fine a movement as it is, is a broad church that needs to be both populist and seen to be competent to a very high degree, much more so than other parties given the scrutiny of it. That's going to breed in a certain level of caution. Until the Greens, SSP, RISE or whoever else can push into major party status, then progress will only occur as fast as the compromises of the SNP will allow it to.

[invergowrie arab]

I dont buy the arguement that local authorities have been sufficiently compensated by Holyrood, it should also be recognised that any additional funding Holyrood is giving to local authorities is money that is not being spent on other services.

The bottom line is that the Council Tax freeze means that collectively we have been paying less than we otherwise would have been paying and that is something that has had a benefit to those who could afford to pay more; those that can't are already covered by exeptions.

Of course the Council tax is inequitable and not progressive, that's why it's disappointing that nothing has been done about it during the course of this parliament.

Well it's not a case of nothing has been done as the very reason we are discussing this is that the Commission on Local Tax Reform was established in this parliament and produced it's report today. A report that will go to parliament in this parliamentary term.

[Granny Danger]

Well it's not a case of nothing has been done as the very reason we are discussing this is that the Commission on Local Tax Reform was established in this parliament and produced it's report today. A report that will go to parliament in this parliamentary term.

OK the SNP lived up to their manifesto commitment and this in itself is commendable. But in the Parliament before the present one they proposed changes that were voted down and they've spent the last five years considering proposals. Personally I would have liked to have seen more done and not have had a five year moratorium that has benefitted the well off disproportionately.

[Crossbill]

Well it's not a case of nothing has been done as the very reason we are discussing this is that the Commission on Local Tax Reform was established in this parliament and produced it's report today. A report that will go to parliament in this parliamentary term.

I think it was only kicked off this year was it not? Something could have been started earlier, but I'm guessing the government wanted to wait for the outcome of the referendum, which could have had a massive impact on the local taxation regime.

Slightly off topic, but does anyone know how the large private estates that make up most of Scotland are actually taxed?

[invergowrie arab]

I think it was only kicked off this year was it not? Something could have been started earlier, but I'm guessing the government wanted to wait for the outcome of the referendum, which could have had a massive impact on the local taxation regime.

Slightly off topic, but does anyone know how the large private estates that make up most of Scotland are actually taxed?

They aren't.

ETA that's not 100% true a couple of estates in the cairngorms do pay land value tax.

Unfortunately that's because the Danish government require their resident to pay LVT on land assets in Denmark or wherever they are in the world meaning that Scottish estates raise more in revenues for the people of Denmark than Scotland.

2ND edit

They actually cost the Scottish taxpayer money through the huge agricultural or renewable energy subsidies they hoover up.

Apologies but land reform is my thing and I get incredibly wound up by it.

[DrewDon]

Somewhat disappointed by the Commission's tepid embrace of a Land Value Tax. I'm very possibly naive, but why is any mention of LVT so often treated with such scepticism? Is it the political implications, or maybe the practicalities? It seems like such an obviously good idea to me.

[invergowrie arab]

Somewhat disappointed by the Commission's tepid embrace of a Land Value Tax. I'm very possibly naive, but why is any mention of LVT so often treated with such scepticism? Is it the political implications, or maybe the practicalities? It seems like such an obviously good idea to me.

It is an obviously good idea but is a huge challenge to vested interests and ingrained cultural attitudes we now have to home/land ownership and what we judge as a successful economy.

LVT would, the more you increase the tax to meet the rental value of land, increasingly make land speculation no longer economically viable. I don't give a f**k about that but many do. At the moment it is viable to buy land and hold on to it, doing nothing useful with it and sit back and tick off the years as the value rises. Under LVT this wouldn't be possible , or less attractive. Of course it would still be possible to turn a profit on land by doing something useful with it like erecting buildings, drainage, utilities and working the land rather than absentee landlords in rural areas or land "developers" in urban areas hanging onto derelict land doing nothing with it.

To Joe Public you would see your house value come down as the land element of that value would be less as it would attract a levy. In the short term that needs managed to avoid negative equity but long term it wouldn't matter that you sell your house for £30k less than what you thought you would as your next property will be similarly reduced to. Again though it requires a cultural shift in our thinking about what a house is for. Is it somewhere to live or is it an investment. Is it desirable to have such a large rental sector and such huge barrier to people getting on the property ladder? I would suggest not but that requires some joined up thinking in the planning of our social housing.

There is also the vested interests of the land developers and estates who will be on the hook for many millions more of contributions to the public purse than they currently pay in.

My politics are that this is all worth it and desirable but ti wont be without challenge to sell to people.

[Billy Jean King]

There will be very little inclination from HMRC to become involved with a Scottish local income tax scheme, that will be the single biggest stumbling block to going down that route.

[Scary Bear]

This topic, or rather the related topic of land reform interests me. I liked that book by Andy Wightman and agree with the recommendations in that chapter towards the end of his book.

Council Tax is ripe for reform.

[strichener]

This topic, or rather the related topic of land reform interests me. I liked that book by Andy Wightman and agree with the recommendations in that chapter towards the end of his book.

Council Tax is ripe for reform.

The book is "The poor had no Lawyers" and it is without doubt the best book on the history of land ownership in Scotland.

[invergowrie arab]

This topic, or rather the related topic of land reform interests me. I liked that book by Andy Wightman and agree with the recommendations in that chapter towards the end of his book.

Council Tax is ripe for reform.

The Andy wightman book is fantastic , well worth a follow on twitter and even as someone who doesn't support the greens I might have been tempted to lend them a vote to help him get in in May.

[Glen Sannox]

How would it affect Michelle Thompson? I would hate to think of a SNP "champion of the poor" being out of pocket!

Sent from my iPhone using Pie & Bovril mobile app

[Dunning1874]

As others have said, The Poor Had No Lawyers is essential reading on this topic. It's astounding how much landowners get away with in Scotland, and LVT is the only way to rein them in. It would be great if Wightman could make it into Holyrood and have the opportunity to contribute to legislation on it.

[invergowrie arab]

Land Reform debate on in Holyrood now.