Scottish Budget should accelerate council tax reform plans
The Scottish Government should use next month’s Budget to accelerate their ambition to reform Council Tax if it is going to happen by the time of the next Scottish election.
The Chartered Institute of Taxation (CIOT) was responding to a Scottish Government consultation on tax priorities for the 2021-26 Scottish Parliament and ahead of the Scottish Budget on 9 December, where it noted the Scottish Government’s commitment to reforming council tax contained in this year’s Programme for Government1.
With previous attempts to reform local government taxation – most recently 2015’s Commission on Local Tax Reform2 – resulting in only minor reforms – the CIOT and its Low Incomes Tax Reform Group (LITRG) said that Ministers should aim for “full consultation followed by the commencement of substantive reform during this parliament – otherwise there is a risk that reform will simply be delayed yet again”3.
An agreement this summer between the Scottish Government and Scottish Green Party promised to set up a Citizens’ Assembly to discuss council tax reform, but it stopped short of setting out concrete proposals for reform and a timetable for introducing legislation4.
In its tax manifesto for the Scottish elections, jointly produced with ICAS (Institute of Chartered Accountants of Scotland) in April, the CIOT said that council tax reform could provide politicians with “the most straightforward option for reform” of existing taxes during the 2021-26 parliament5.
Scottish Ministers have since ruled out major changes during this parliamentary term to two of the main taxes under their control – Scottish Income Tax and Land and Buildings Transaction Tax (LBTT).
This limits the scope for significant changes to the taxes already under Holyrood’s control6.
Joanne Walker, Scottish Technical Officer for CIOT, said:
“A Citizens’ Assembly on council tax reform will allow a range of opinions to be heard and it is welcome that the Scottish Government is committed to consultation and engagement.
“If the Scottish Government is serious about its commitment to deliver reform, then we need to have a clearer understanding from Ministers about what they want to achieve from this process, how a reformed council tax can support their stated objectives of creating a fairer and greener country, and a clearer timetable for introducing legislation to Holyrood.
“Otherwise, there is the risk that another attempt to reform local government finance will end up delivering less than it set out to achieve.
“With each of the parties in the Scottish Parliament committed in some shape or form to council tax reform, and with major changes to other Scottish taxes unlikely, this seems likely to be the best opportunity that Ministers will have to use Scotland’s existing tax powers to put their principles into practice”.
ENDS
1. You can read the CIOT/LITRG response to the consultation here Tax Policy and the Budget.
2. Following the publication of the Commission on Local Tax Reform’s report in December 2015, Ministers legislated to change the Council Tax regime by increasing the amount paid by the highest value properties and to establishing a relief system for low to middle-income households impacted by the changes (see https://www.gov.scot/policies/local-government/council-tax/#reforms).
3. See page 6 of the CIOT/LITRG response to the consultation Tax Policy and the Budget (above).
4. The agreement between the Scottish Government and Scottish Greens this summer agreed to ‘establish a working group with representation from the Scottish Green Party, engaging with COSLA, to oversee the development of effective deliberative engagement on sources of local government funding, including Council Tax, that culminate in a citizens’ assembly’. (Scottish Government and Scottish Green Party Draft Shared Policy Programme, p.24).
5. CIOT/ICAS (April 2021) Building a Better Tax System (p.18): “From the perspective of tax administration, Council Tax may offer the most straightforward option for reform. Other taxes within the control of the Scottish Parliament are either unlikely to raise significant sums of money or are more reliant on interactions with the wider UK tax system.”
6. The Scottish Government’s Programme for Government, A Fairer, Greener Scotland: Programme for Government 2021-22, states that Ministers will “maintain the current rates and bands for residential Land Buildings Transaction Tax” (p.95) and “freeze Income Tax rates and increase thresholds by no more than inflation for the duration of this Parliament” (p.114).