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What will be the true consequences of SNP plans for a local income tax?



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Published Date: 05 September 2008
Most of your 25 reasons why Alex Salmond should drop local income tax (your report, 4 September) are perfectly valid, on top of which should be added that attempted implementation would swiftly develop into a monumental bureaucratic shambles.
However, I am astonished to read your reason 17, the oft-repeated and much-loved left-wing belief that so-called "wealthy" people who have income from sources such as share dividends will avoid LIT while poorer people would have to pay. LIT rules wou
ld surely not differ in this respect from those of the Inland Revenue, whereby dividends are subject to 10 per cent tax at source, but have to be declared on tax returns, resulting in the remainder being subject to additional tax in accordance with normal personal allowances and tax bands thereafter.

Of course, if recipients fail to declare such income, then that is criminal evasion, not avoidance, but many other types of income are, and always will be, susceptible to criminal evasion.

DJ HOLLINGDALE
Easter Park Drive
Edinburgh

Your report, "25 reasons why Alex should drop local income tax" made very unbalanced reading and deserved better editorial scrutiny. The chief secretary to the Treasury, Yvette Cooper, claimed there would be a "financial black hole in Scotland" as there would be £750 million less tax collected. The Institute of Directors then claimed: "LIT will make Scotland the highest-taxed part of the UK."

Both can't be right. Can we please get away from the negative politics of FUD (fear, uncertainty and doubt) and have a sensible debate on what is a very important issue for the people of Scotland?

MICHAEL N CROSBY
Little Compston
Muiravonside, West Lothian

The announcement by Alex Salmond that council tax is to be scrapped illustrates how "in touch with the people" the SNP is. Only the most out-of-touch political parties, such as Labour and the Tories, can dream for one minute that "ability to pay" should not be considered for council tax. If that were the case why is income tax justified on ability to pay?

Council tax is a huge burden on the least well off in Scotland.

JAMES PURVES
Braid Lea
Selkirk

You report "widespread opposition" to local income tax and completely ignore the majority view. Supporters of LIT vastly outnumber those who oppose it and The Scotsman's studious failure to report this side of the argument is a disgrace.

The fact that the Labour Party, big business and a few other highly paid individuals care not about the serious plight of those struggling with council tax payments comes as no surprise to those of us who consider a fairer society, where all tax is based on individuals' ability to pay, is one worth fighting for.

ALLAN JOHNSTON
Dudley Terrace
Edinburgh

So, representatives of students and armed forces personnel are opposed to local income tax and the Labour Party reckons it would need to be set at 4.5 per cent to raise enough money for local services.

Currently, I pay 7 per cent of my pension in council tax. As there are many more pensioners than students and soldiers in Scotland, Alex Salmond must be on to a winner.

JAMES D BROWN
Burnside Road
Elgin, Morayshire



The full article contains 551 words and appears in The Scotsman newspaper.
Page 1 of 1

  • Last Updated: 04 September 2008 9:20 PM
  • Source: The Scotsman
  • Location: Edinburgh
 
1

Wee Pal Joe,

05/09/2008 01:22:19
How can anyone (and especially the SNP) call something which applies at the same rate across Scotland and is collected centrally "local"?

Will Revenue & Customs administer it? Could they refuse? If they do administer it, who will pay for it?
2

Richardinho,

05/09/2008 08:16:41
#1 Is anyone going to care if they end up paying less tax?
3

Linda,

Edinburgh 05/09/2008 09:04:50
The proposed tax is local on basis UK is national.

Customs and Revenue have the mechanics in place and a duty to collect 3p in £ under Scotland Act.

Any more questions Wee Pal

It is hypocritical for NUS to complain about LIT. Any student unfortunate to pay any tax at all will be hurt 3 and half time more by Gordon Brown's decision to double to 10p tax band to 20p. The NUS is silent on that.

Unions should start looking after their lower paid workers and support LIT rather than bankrolling the Labour Party.
4

Martinh,

05/09/2008 09:34:11
If 80% of Scots pay less with LIT than under the council tax, then it is a valid question to ask whether the 20% who will pay more will be enough to compensate for a drop in local revenue. If we are to have a serious debate about changing the way in which local revenue is raised, then this fundamental question must be answered, otherwise local services will implode, and there will be mass redundancies for local authority workers. This isn't doom and gloom but my own opinion is if there is a local shortfall then that authority should be able to cover that with an additional local variation according to need. I've no idea about the validity of the £750 million black hole (reason 1)but what is the counter argument, other than the £400m council tax support grant currently supplied centrally? That would still leave £350 milion shortfall so where is this to come from?

Reason 23 regarding collection of water charges is also something that has to be addressed. Will they be collected as at present as a lump sum attached to the council tax (and so remain regressive with regard to ability to pay) or also charged according to ability to pay? Any answers?

5

Wee Pal Joe,

05/09/2008 09:37:11
Linda,

What Revenue and Customs are obliged to deal with is a variation in the basic rate of UK income tax, not a local tax. But is this local? A genuinely local income tax would have different rates in different localities within Scotland. And wouldn't it be administered by local authorities, not the UK's tax department?
6

Martinh,

05/09/2008 10:36:20
#6. I'm sorry Scallywag, but the two issues I raised are not fine tuning, they are absolutely fundamental and as yet unanswered. You don't start a 1000 mile journey by leaping blindfold off a ledge not knowing whether the drop is 6 inches or 1000 feet. The track record of local Government revenue raising is not impressive, the Rates, deeply unpopular and regressive, the Poll Tax, even more so leading to riots in the street, the Council tax, unpopular and regressive, but a kind of grudging acceptance, and now a non local LIT. Call me cynical but I need more reassurance than you have given.
7

shivago8,

livingston 05/09/2008 10:42:54
All the brassards £17 millions worth of the refuse to pay in Edinburgh will not get away with it sny longer.

HIP HIP HOORAY.
Will now help to lower the tax once these defiants are caught out and made to cough up
8

Miles,

Better away from Glasgow 05/09/2008 12:03:23
After paying tax on my pension which is treated as unearned income I then cough up 17% on what remains as a Council tax payment. Roll on local income tax - if it is 3p in the pound my my saving will be around £1,800.
9

Publius,

London 05/09/2008 16:33:42
#4 Martinh

The claim isn't that 80 percent of Scots will pay less under LIT but that 80 per cent of Scottish households will pay no more. A huge number of persons who currently do not pay council tax - working/spouses, adult offspring living with parents, carers, nannies/au pairs, students, student nurses, apprentices - will pay an extra 3 percent tax.
There will probably be more individual 'losers' than 'winners'.
10

Zander G,

EDINBURGH 05/09/2008 20:10:14
#9 - Miles - your pension is actually treated as earned income, not unearned income. Of course the tax on interest received and pensions received is now the same at 20% (previously the pension was taxed at 10% and 22%).

As for the point made by DJ Hollingdale he or she is quite correct in stating that unearned income should be subject to Local Income Tax. Indeed the Liberal Democrats have incorporated that in their proposals - it would be a flat rate deducted at source and applied across the UK. The trouble arises when you try to apply this on a Scottish only basis - M(r/s) Hollingdale seems to think that this is just a matter of filling in the figure on a tax return - which would be fair enough if everyone received a tax form. I suspect that tax forms are only sent out to about 20% of the population and the illegal tax evasion will be minimal since most of these people will have tax deducted correctly at source (by PAYE and by banks). If tax on savings is to be collected from Scots on their savings then that will require an awful lot more forms to be completed - and perhaps a bit more tax collected from some low income people who have unwittingly not being paying enough tax because they have not filled in forms (by the same token there will be some who receive tax back because they have not filled in a form and the tax authorities are unaware of the fact that their income is so low).
11

Zander G,

EDINBURGH 05/09/2008 20:24:09
Michael N Crosby clearly does not understand economics and the concepts of marginal tax rates and total tax collected. From another angle he has not appreciated that one of the commentators is using "tax" as a verb while the other uses it as a noun.

I suspect that the chief secretary to the Treasury, Yvette Cooper, is correct in claiming that there will be a "financial black hole in Scotland [under LIT]" as there would be £750 million less tax collected. At the same time the Institute of Directors are correct in claiming: "LIT will make Scotland the highest-taxed [marginal rate for those paying tax] part of the UK."

The point is that in Scotland many individuals will be paying 23% or 43% of their additional income as tax, whereas in other parts of the country the rate is 20% or 40%. That makes Scotland higher taxed (that is using tax as a verb) while at the same time, despite having been taxed more highly these individuals have the misfortune to be living in local authority areas which have failed to collect sufficient tax (noun) to cover the costs of local services.
12

Joe,

Colinton 06/09/2008 08:28:42
I'm sitting in a £2M mansion, I don't work and have pots of money in an offshore bank. Under the good old SNP plan I would be paying nothing..bring it on! These guy's policies are better than Maggie Thatcher's.

 

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