Keep tax local – but make it more accountable

Thursday, February 04, 2010

Scotland should retain a property-based local tax, set and raised locally, and based on the current system of council tax, the Chartered Institute of Public Finance and Accountancy (CIPFA) has urged.

The call comes in CIPFA's submission to the Institute of Revenues, Rating and Valuation (IRRV) inquiry into local taxation reform.

CIPFA recommends that the current council tax system be reformed to include a more accountable system with a clear distinction for customers between local taxation and water and sewerage charges levied by Scottish Water.

It calls for a more up-to-date tax base where there is a statutory requirement for periodic revaluations of all domestic properties in Scotland and a re-examination of the relationship between the highest and lowest bands.

Also, CIPFA says, taxpayers should better informed, with improved access to understandable financial information on what is to be spent and what has been spent.

Head of CIPFA in Scotland, Angela Scott said: "The relationship between local tax raising powers and elected members has always been at the heart of local authority accountability. Council tax, set locally by each local authority in Scotland, is an endorsement of this principle."

In its submission, CIPFA said the continued national arrangement to freeze council tax will have an adverse impact on local accountability and that the revaluation of domestic properties should be conducted automatically without the need of government sanction.

It added that the property tax base should be modernised before other forms of taxation are considered as a way to top-up local government funding levels.

The submission reads: "We recognise that there will be debate and merit in considering wider forms of local revenue sources. It is right that the Committee of Inquiry address these matters.

"Our position is that other forms of taxation such as road user charging or tourism taxes should not however be seen as a substitute for modernisation of the property tax base. In our view, attention should be focused upon getting the core basis of taxation right. Only then should other forms of taxation and or revenue sources be considered seriously as top-up sources."

The IRRV inquiry was launched in September last year to examine a range of funding options, including property-based taxes, and whether there are suitable mixes of funding options. It is due to report in September this year.

The inquiry came in the wake of the decision by the Scottish Government to drop its plan to abolish the council tax in favour of a local income tax due to a lack of support in parliament.

Finance Secretary John Swinney said legislation to bring in a local income tax would not be introduced until after the next Scottish election.

IRRV Scottish Association President, Brian Jeffrey said: "A stable and fair local taxation system is the bedrock for high-quality local authority service provision. It is vitally important that any system properly takes into account the ability to pay. There is debate currently about the future structure of the Scottish local tax system.

"We have an opportunity to be bold and innovative and to tailor a local taxation system that suits the needs of the Scottish people, without sacrificing the financial stability of local authority services."