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LOCAL GOVERNMENT FINANCE REVIEW COMMITTEE CONSULTATION:
FEEDBACK REPORT - ANNEX B
SUMMARY OF VIEWS
Comments on the Committee's Working Principles
1. The broadly held feeling was that the criteria identified
in the consultation (and which had been listed within the
remit given to the Committee by Scottish Ministers) were reasonable.
2. Within these, the biggest issue among members of the public
was about the fairness of a system of local
taxation. This was most usually expressed as being linked
to ability to pay, although another factor also referred to
was a closer correlation between payment and the number of
people in a household.
3. The issue of fairness also affected public's views on other
principles. One example related the question of where the
balance of funding should lie (i.e. how much
of a local authority's income should come from local taxation).
In this case, many members of the public who expressed dissatisfaction
with the fairness of Council Tax also argued for a larger
share of local government income to be funded from the Scottish
Executive and/or for responsibility for some services to be
transferred to the Executive, because they thought national
taxes tend to be fairer.
4. Among local authorities there was strong support for the
concept of 50:50 balance of funding (i.e. with locally-set
taxes accounting on average for half of a local authority's
income). Some local authorities argued that the principle
of a robust local tax and funding system was more important
than any particular balance of funding ratio.
5. The responses seemed to have put in question the classically-held
view of accountability - i.e. that people
are more likely to vote if they pay directly for those services.
A sizeable body of respondents appeared to attach greater
importance to who is seen to manage these services and the
quality of these services than on how they are paid for. Amongst
local authorities there was strong support for enhanced local
democratic control and accountability.
6. Members of the public who responded and local authorities
alike viewed the costs of collection and
scope for avoidance as important issues.
Local authorities were typically more inclined to place weight
on other criteria (e.g. stability, predictability
and buoyancy) than were members of the public
who responded.
Comments on Council Tax
7. There was a consistent view that keeping Council
Tax (CT) in exactly its current form was not the
answer, but no clear view about what that answer was. Many
believed that CT needed to be replaced with a new type of
tax. However, a significant number believed there would be
value in retaining CT, with changes made that improved the
link with ability to pay (e.g. by increasing the number of
CT bands, increasing the multiplier scale between bands, taking
the number of individuals in a household into account, taking
household income into account).
8. Among those responding who were critical of CT, many appeared
to be more concerned with the levels of local tax (and especially
the fact that CT has increased more quickly in percentage
terms than many people's incomes) than in the features of
the Council Tax model itself.
9. Local authorities were more likely to consider CT to be
relatively simple and cheap to collect, and difficult to avoid,
than were members of the public who responded.
10. Some criticism was levelled from members of the public
on Council Tax Benefit. Particular concerns included that
eligibility can be affected by modest levels of savings, that
the application form was described as being complex to complete
and, to a lesser extent, that the process of applying for
benefit was perceived as being demeaning for pensioners.
11. There was strong support from local authorities and a
sizeable proportion of members of the public and other organisations
who responded for properties to be revalued if CT is retained.
However, there was also a strong body of opposition to revaluation
from members of the public who responded.
Comments on Other Non-Business Taxation Options
12. The concept of a Local Income Tax (LIT)
in place of CT attracted support from a significant number
of those members of the public who responded. The main reason
was its perceived fairness and correlation with ability to
pay. However, there appeared to be no consistent view among
these respondents as to how such a tax would operate. In particular,
in many cases it was unclear whether respondents envisaged
LIT rates being set by local authorities or nationally by
the Scottish Executive.
13. Local authorities and other organisations tended to be
critical of a LIT, for a variety of reasons (e.g. it would
have a narrow tax base; it might be complex and expensive
to administer; burdensome for businesses to administer; those
eligible for full/substantial Council Tax Benefit may actually
be worse off than under CT). Political parties were split
on the merits of a LIT.
14. There was some interest in a Local Sales Tax.
Reasons for support included that it would offer a wide tax
base, would be difficult to avoid, predictable, buoyant and
reasonably fair. Comments were also made that it appears to
work well in some other countries. However, fears were raised
that this tax would be regressive, would undermine accountability
and would be subject to a number of practical problems.
15. There was very limited support for a Land Value
Tax. Its advocates felt it would be simple to collect,
difficult to avoid and would stabilise land values by getting
rid of the speculative element. However, many stakeholders
opposed it, with reasons including that it had no major benefits
over CT; it would be applied only over a narrow tax base thereby
undermining accountability; it would not be well understood
by the public, and that there may not be sufficient comparable
data on which to make robust valuations.
16. Very little support was expressed for Domestic
Rates (because it would not overcome the perceived
disadvantages of CT); Vehicle Fuel Tax (viewed
as being politically unpopular, particularly in rural Scotland)
or a Tourism Tax (seen as being unfair to
tax this industry on which the Scottish economy is so reliant).
There was also very little support in practice for a Poll
Tax. While a number of respondents supported the
principle of a poll tax because they believed that all those
who benefit from local services should contribute to the cost,
many felt that recent experience of the Community Charge ruled
out this option.
17. A number of other possible methods of tax were identified,
including taxes on Lotto proceeds, alcohol, aviation fuel,
cigarettes, chewing gum, credit cards and plastic bags.
Other Issues
18. There was broad support for the retention of business
rates among those who responded on this issue. No possible
alternative to existing arrangements attracted as much support.
Business organisations opposed the suggestion that business
rates be re-localised (i.e. that local authorities regain
the power to set these rates). Among local authorities, however,
there was strong (although not universal) support for the
relocalisation of rates.
19. We also received helpful comments on the issues of charges
levied by local authorities for services, water and sewerage
charges and the broader funding methodology for local authorities.
Local Government Finance Review Committee
July 2005
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