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A Fairer Local Tax for Scotland - Scottish Government analysis of the consultation

Background

The current Scottish Government stood for election with a stated proposal to abolish the council tax and replace it with a "fairer" local tax based on ability to pay.

Proposals for a new local taxation system to fund local authority expenditure include:

• A tax free personal allowance that matches the UK personal allowance levels
• A 3% rate applied to the income that is subject to basic and higher rates of UK income tax
• Collection that complements the existing national system of collection through Pay as You Earn ( PAYE) and self assessment
• Exemptions for savings and investment income
• A tax for second homes, which will be subject to local requirements, and broadly comparable to the current council tax on second homes.

The Scottish Government aim to deliver these reforms as quickly as possible and within the term of the current Scottish Parliament. It produced a consultation, A fairer local tax for Scotland to sound out views on these reforms.

Responses to the consultation

Low Incomes Tax Reform Group

The low incomes tax reform group , in its response is concerned over the lack of clarity in the proposals relating to the administration and collection of the tax.

"We also have specific concerns for the vulnerable. For example, how does any new system recognise the exemptions and discounts that are already inherent in the council tax? This is very relevant, for example, for people with disabilities."

The Law Society of Scotland

The Law Society of Scotland has concerns about the following:

• whether the proposals outlined in the consultation paper constitute a local tax and therefore whether the Scottish Government has the constitutional authority to implement such a system
• whether HM Revenue and Customs (HMRC) are willing or able to collect the tax (if they are, changes to UK legislation would be required)
• the effect of such a tax on those with low incomes
• the effect on families receiving tax credits
• the difficulty of introducing discounts and exemptions into the scheme
• the effect on disabled taxpayers in employment

You can view these response from the links below.

The Council Tax Abolition Bill

On 3 September 2008 the Scottish Government included the Council Tax Abolition Bill in its programme for the year ahead.

"Following the public consultation, we will introduce a Bill to abolish Council Tax and introduce a fairer Local Income Tax, based on ability to pay. Our proposals for the biggest tax cut in Scotland in a generation mean four out of five households will be better or no worse off."

Source Moving Scotland Forward.

Scottish Government analysis of the consultation

The Scottish Government published its analysis of the consultation on 24 November 2008, which finds:

• 55 per cent of individuals thought the local income tax was the fairest form of taxation, with just 25 per cent in favour of the council tax
• 57 per cent of individuals supported a nationally set rate
• 62 per cent of people felt the tax should be collected at source
• 60 per cent of individuals and organisations supported collection by HM Revenue and Customs
• a majority of individuals and organisations thought Scotland should retain money equivalent to the council tax benefit

The Scottish Government intends to publish a Bill to abolish council tax in this Parliamentary year. You can download A Fairer Local Tax for Scotland: Analysis of Consultation Responses and an accompanying press release from the Scottish Government link. below.

More information

• consultation

1. a fairer local tax for scotland - link to consultation
2. a fairer local tax for scotland: analysis of consultation responses - Scottish government website
3. press release: consultation - Scottish government website
4. press release: analysis - Scottish government website

• consultation responses

1. councils support local income tax - BBC website
2. institute of revenues, rating and valuation
3. the law society of scotland
4. low incomes tax reform group
5. moray council (pdf file)
6. scottish chambers of commerce (pdf file)

• moving scotland forward

1. moving scotland forward - Link to full report
2. press release - Scottish government website

Note: for pdf files you will need to download adobe acrobat reader. To convert the pdf to alternative formats or for more information on accessibility go to access adobe.

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