This is a real thrupenny thought!
The SNP government in Scotland has published its proposed legislative programme for the parliamentary session, including plans for a “Local” Income Tax to replace the current Council Tax system.
As I understand it, the proposal is to abolish the Council Tax, which is a property based tax set and collected separately by each of the 32 local authorities in Scotland. (By the way, the thrupenny bit comes in because it’s likely that the proposals would add 3pence to the existing Income Tax rate.)
Now I need to declare a pecuniary interest in this. First of all, I work in local government; secondly I’ll be a ‘loser’ financially if the SNP proposals ever make it to the statute books.
Predictably there’s been a party political stooshie about this with all sides adopting their familiar, entrenched positions. But I want to spend a few moments thinking through some of the underpinning issues as I see it.
All parties in Scotland seem to agree that the existing Council Tax regime is unfair. So what constitutes a fair system of taxation? Ideally it should reflect consumption of the end product and to some extent reflect ability to pay.
Neither the Council Tax nor any form of ‘local’ income tax will reflect consumption, and any attempt to measure the use of local government services by each citizen/ family would be so hideously complex and contentious that it would be completely unworkable. Income tax does come closer to measuring ability to pay.
What else do we need to consider?
Cost of collection is surely an issue. To collect Council Tax, each local authority needs to have staff and systems to notify citizens of the amount that they are each due to pay, collect these amounts through a variety of methods, and chase those who choose not to pay. There is a also a system for assessing individual relief from payment due to individual financial circumstances. On the other hand, it is argued that Revenues and Customs already collect money from all income tax payers, so varying the percentage to be collected from me shouldn’t be too difficult. It is clearly more straightforward to collect if the rate is set nationally, as opposed to separate rates for each authority.
Of course the big, philosophical show-stopper is about accountability – so the opposition parties say. The argument runs that each Council must be accountable to their citizens for the amount of money collected from taxation to run their services. There is a certain logic to this position – except that Council Tax currently represents less than 20% of the money spent by each local authority. The rest of the money comes through direct charging for services (e.g. use of leisure facilities, payments for social care), business rates AND funding from central government – which in turn comes from INCOME TAX (and other nationally set taxes).
Do citizens judge their democratically elected representatives solely - or mainly - on the basis of how much tax they pay? What view do they take of outcomes and the quality of services delivered? What about ensuring that services are provided to the most vulnerable?
And what about the fact that turnout in local government elections is laughably low and likely to decrease if/when they are de-coupled from Scottish Parliament elections?
In my opinion, if the issue is about fairness then ‘local’ Income Tax wins the argument. This is also true in terms of the cost of collection.
As for accountability – well there’s a real debate around that, if only the politicians were capable or willing to look at it from the citizens’ perspective rather than a party political one. But is there any prospect of a mature debate on this? Not a chance!!
The SNP government in Scotland has published its proposed legislative programme for the parliamentary session, including plans for a “Local” Income Tax to replace the current Council Tax system.
As I understand it, the proposal is to abolish the Council Tax, which is a property based tax set and collected separately by each of the 32 local authorities in Scotland. (By the way, the thrupenny bit comes in because it’s likely that the proposals would add 3pence to the existing Income Tax rate.)
Now I need to declare a pecuniary interest in this. First of all, I work in local government; secondly I’ll be a ‘loser’ financially if the SNP proposals ever make it to the statute books.
Predictably there’s been a party political stooshie about this with all sides adopting their familiar, entrenched positions. But I want to spend a few moments thinking through some of the underpinning issues as I see it.
All parties in Scotland seem to agree that the existing Council Tax regime is unfair. So what constitutes a fair system of taxation? Ideally it should reflect consumption of the end product and to some extent reflect ability to pay.
Neither the Council Tax nor any form of ‘local’ income tax will reflect consumption, and any attempt to measure the use of local government services by each citizen/ family would be so hideously complex and contentious that it would be completely unworkable. Income tax does come closer to measuring ability to pay.
What else do we need to consider?
Cost of collection is surely an issue. To collect Council Tax, each local authority needs to have staff and systems to notify citizens of the amount that they are each due to pay, collect these amounts through a variety of methods, and chase those who choose not to pay. There is a also a system for assessing individual relief from payment due to individual financial circumstances. On the other hand, it is argued that Revenues and Customs already collect money from all income tax payers, so varying the percentage to be collected from me shouldn’t be too difficult. It is clearly more straightforward to collect if the rate is set nationally, as opposed to separate rates for each authority.
Of course the big, philosophical show-stopper is about accountability – so the opposition parties say. The argument runs that each Council must be accountable to their citizens for the amount of money collected from taxation to run their services. There is a certain logic to this position – except that Council Tax currently represents less than 20% of the money spent by each local authority. The rest of the money comes through direct charging for services (e.g. use of leisure facilities, payments for social care), business rates AND funding from central government – which in turn comes from INCOME TAX (and other nationally set taxes).
Do citizens judge their democratically elected representatives solely - or mainly - on the basis of how much tax they pay? What view do they take of outcomes and the quality of services delivered? What about ensuring that services are provided to the most vulnerable?
And what about the fact that turnout in local government elections is laughably low and likely to decrease if/when they are de-coupled from Scottish Parliament elections?
In my opinion, if the issue is about fairness then ‘local’ Income Tax wins the argument. This is also true in terms of the cost of collection.
As for accountability – well there’s a real debate around that, if only the politicians were capable or willing to look at it from the citizens’ perspective rather than a party political one. But is there any prospect of a mature debate on this? Not a chance!!
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