What People Think About Local Taxes
by Ken Gibb
The final report of the Scottish Commission on Local Tax Reform is believed to be only a few ‘weeks away’. The idea is that the recommendations will help inform the Scottish political parties in the their manifesto development for the May Scottish elections. The main issues that the Commission will report on are:
- To ask to what extent the council tax needs to be reformed from minor adjustments to significant reform, to abolition and replacement with an alternative form of local taxation?
- If it is replacement, what for of local tax are we talking about?
- What is to be done about the council tax freeze, now in its eighth year?
This discussion has been framed around specific criteria that informs the Commission’s work:
“The Commission on Local Tax Reform’s remit is to identify and examine alternatives that would deliver a fairer system of local taxation to support the funding of services delivered by local government.
In doing so, the Commission will consider:
- The impacts on individuals, households and inequalities in income and wealth
- The wider macro-economic, demographic and fiscal impacts, including housing market and land use
- The administrative and collection arrangements that apply, including the costs of transition and subsequent operation
- Potential timetables for transition, with due regard to the 2017 Local Government elections
- The impacts on supporting local democracy, including on the financial accountability and autonomy of Local Government
The revenue raising capacity of the alternatives at both local authority and national levels.” [CLTR Website – Commission Remit]
To whet our appetite and keep us interested until the final report is published, the Commission last week published an analysis of the submissions they received from the public.
There were 4,492 responses to the Commission’s online survey. The sample was not entirely representative. Not surprisingly, there were a lot of people with Band D or above council tax bands, often men, over 55, home-owners and full time workers – all of whom were over-represented.
The main findings included:
- The majority thought that the council tax was easy to pay and understand.
- Three quarters thought that local tax should not be based on everyone paying the same amount; over half felt it should be broadly related to income.
- Regarding views about the council tax – over two-thirds did not feel the council tax was fair; almost half felt it was unclear how council tax payments related to spending on local services; almost two-thirds felt the council tax should be replaced.
- Respondents were asked if there was one thing they could change about council tax what would it be? Only 4% raised the council tax freeze. About a quarter who responded focused on changing the current bands and revaluation. However, to quote the executive summary, many did focus on wider tax reform.: “Almost half of the respondents … said that the main thing they would change about the current system is the basis of taxation. A hybrid tax was the most frequently mentioned of these options, with many supporting a mix of tax based on property, land, wealth and income. Many didn’t comment on their reasons for these suggestions. However, those who did felt that hybrid options which took into account a combination of factors would be fairer than a single system”.
While I would not overstate these views, they are interesting. A hybrid tax or indeed multiple taxes are not uncommon elsewhere and can offer offsetting dimensions e.g. taxing land and/or property but also making a local tax contribution through an income tax supplement. However, the Burt Commission in 2006 rejected a multiple tax system or indeed any alternative to a straightforward property tax.
There is an interesting paradox here. The pure property tax solution proposed by Burt remains a difficult choice politically (despite its many attractions to me) but a hybrid or combination of property and income taxation (starting as a revenue neutral tax) appears to have mileage in some quarters. Many countries have multiple tax systems and the UK is at the end of the spectrum with just one domestic local tax and (outside of Ireland who copied the UK) the only banded property tax.
We will know soon enough what the Commission has to say and I hope, at least, that it is not rejected in the summary way that Burt’s careful and comprehensive analysis was by the then Scottish Executive in 2006.