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Scottish Commission on Local Taxation Report

December 21, 2015

The Local Tax Commission Report

A reflection by Duncan Pickard

The only conclusion in the Local Tax Commission Report which is definitive is that “the current system of Council Tax must end”. It follows that another system must be found to replace it, but the Commission is unable to decide what that should be because “there is no one ideal local tax”.

It seems that many of those who contributed to discussions were in favour of a Local Income Tax and were described as understanding it, but when the difficulties associated with the implementation of the Income Tax were explained, its advocates showed their lack of understanding. All they had was familiarity with Income Tax, not the understanding of it.

The commission recommends an element of property tax should be retained, and although ‘property’ is not clearly defined, it generally refers to houses. But the fact that the ‘current system of Council Tax must end’ because ‘it is not fair, progressive or locally empowering’, does not indicate that a tax based on the current market price of houses deserves to be retained, even with more frequent revaluations.

The third option discussed is Land Value Tax but the commission was reluctant to support its introduction despite several references to its positive attributes. It is pleasing that item 13.13 says ‘Land Value Tax is promising,(its) introduction should be given consideration as part of a broad based system of local taxation’. Perhaps unfamiliarity with Land Value Tax was the main reason for the Commission’s conclusion that ‘A move to land value tax would require better knowledge of land ownership and values to be developed over a number of years’ (12.17). This is despite an earlier finding that ‘The experience of countries such as Denmark demonstrates that a land value tax can be made to operate’ (8.14).

If all Commission members had a thorough understanding of Land Value Tax, perhaps they might see that it comes very close to the ‘the one ideal local tax’ that the commission was set up to find to replace the Council Tax.

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