REFORMING council tax could see lower bills for as many as eight in 10 Scots.
That was the argument which came from Common Weal’s head of policy Craig Dalzell as he spoke to The National for our Axing the Tax series on Thursday.
Dalzell argued that council tax could be replaced with a levy which charges 0.63% of the value of a property. At 2020 house prices, he said, this would have been revenue neutral – but more progressive than the current system.
As it stands, council tax is levied based on estimates of what property values would have been in April 1991, making it “probably about the most broken tax we have in Scotland”, Dalzell said.
READ MORE: Taxing the land not the buildings: How a land tax could work in Scotland
Council tax is also currently levied based on “bands”, with more expensive properties in higher bands. However, as many as half of all Scottish properties are thought to be in the wrong bands, and there is very limited flexibility at the higher ends.
Dalzell said: “If you take an example of a £70,000 Band A house, your council tax is probably about £850 a year. If you've got a £700k house in Band G, you're only paying just over £3000 a year, 3.5 times as much.
“If you have a £7 million house, 100 times the value of that Band A house, you're still only paying 3.5 times as much council tax. It's a ludicrous situation.”
By way of replacement, Common Weal first proposed a 0.63% property value tax rate in a paper in 2021. Dalzell said it would mean a tax cut for around 80% of Scots.
“To put that in proper numbers, if you had a £100k house, then your council tax, your property tax, would be £630 a year,” he explained.
“If you had a £70k house in Band A that is currently paying £850 council tax, you'd actually under our system be paying more like £440.
“Those bigger houses, a £700k house would be paying £4500. A £7m house would be paying £44k a year in property tax under our system, which is how it remains revenue neutral.
“You'd have the people in the really, really big houses paying a substantially larger sum for that privilege.”
READ MORE: Lack of local tax reform 'one of Holyrood's biggest failures', Patrick Harvie says
He went on: “The break-even point we found is actually something like – it's difficult to say because of the misbanding issues – but something like a house worth about £400k in Band G would pay about the same as they currently do in council tax under our system.
“So that means about 80% of households in Scotland would get a tax cut.”
Asked how price valuations could work, especially for people who live in the same place for decades – or even their whole life – Dalzell said there were many workarounds but in “countries that have this kind of tax, like Denmark, Estonia, you have periodic updates” of value.
He argued that a valuation system would be fairer as it could also take into account land – and doing so locally would circumvent any issues with devolution.
Dalzell said: “The council tax already taxes your garden. What it doesn't do is tax the shooting estate you own up in the hill. So what we would do is just take that property tax and extend it to the shooting estate.
“As for the local aspect, that's probably the only way to do it. Under the current settlement, the Scottish Government has very limited powers to to introduce a new national tax, especially if it doesn't have the permission from Westminster to do it.
READ MORE: How do other countries do council tax?
“But the Scotland Act explicitly allows local taxes to be introduced so long as the revenue for those taxes fund local services. As long as the money doesn't go to Holyrood, as long as the money stays in the local authority, we can create as many taxes as we like.”
With the next Holyrood elections around 18 months away, it may be too late in the day for the current SNP Government to make a move on the issue – despite pledges dating back to before they first took power in 2007.
The 2021 Holyrood election saw the party, then under Nicola Sturgeon, elected with a pledge to form a “Citizens’ Assembly” to discuss a way forward for council tax. But nothing has yet materialised.
Dalzell said: “It's even ludicrous that we're still talking about what is the case for reforming council tax. We won that argument 20-odd years ago. But we're still here, we're still talking about it, we're just desperately waiting for the Scottish Government to do it.”
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