Scotland should abandon council tax for a levy based on property values that would ensure wealthier households pay more, according to a think tank.
The Institute for Public Policy Research (IPPR) Scotland said its idea would mean owners of properties in bands F to H paid more than now. It says that the existing system is based on property values from 30 years ago. Researchers indicated low to middle-income families paid more as a proportion of their earnings on council tax.
IPPR Scotland’s idea would be to move towards an annual bill 0.75 per cent of a home’s value. It says it could be introduced for new purchases and then brought in across the whole system.
Russell Gunson, the director of IPPR Scotland, said: “We need to talk about tax in this election. Whoever wins in May, it’s likely that taxes in Scotland will need to increase to help invest in the Covid recovery and build a fairer Scotland than went into the pandemic.
“With house prices increasing, benefiting the wealthiest the most, we think reform of council tax could be a fair and progressive part of the solution.”
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The think tank also wants to see changes made to council tax until a new levy can be brought in.
Its research found that Scotland would have £600 million more to spend on public services if bills matched the average in Wales, and £900 million more if they were raised to be in line with the average charges in England.
It said that increasing bills for higher value properties more quickly over the course of the next parliament could raise almost £400 million annually by the 2025-26 financial year. Those plans would lead to annual increases for properties in bands E to H of between 4 per cent and 10 per cent.
It also recommends taking all families in poverty out of paying any council tax by the end of the Holyrood session at a cost of about £300 million while also reducing bills for those on low incomes. Gunson added: “Council tax is out of date and unfair. Lower income families pay the highest bills as a proportion of their income. It also doesn’t raise enough money, with public services in Scotland losing out on hundreds of millions of pounds a year compared to money raised through council tax in the rest of the UK.
IPPR Scotland also wants ministers to look at introducing local tax policies in areas such as carbon and land.
