CHAPTER 1: INTRODUCTION
BACKGROUND
1.1 In May 2007, the Scottish National Party became the official party of Government in Scotland. The abolition of the council tax, which is used to fund local authority spending, and its replacement with a fairer system of taxation, was amongst key pre-election proposals. The Scottish Government has taken steps to fulfil this commitment by fully funding a freeze on council tax.
1.2 The Scottish Parliament has already voted in favour of the principle of abolishing council tax and this was followed in March 2008 by the publication of proposals for its replacement with a local income tax in a consultation on "A fairer local tax for Scotland".
1.3 The consultation document set out the Scottish Government's proposals for the future of local taxation in Scotland, asked a series of questions on the proposals and invited further comment on these and on any associated issues.
1.4 Proposals include:
- a personal allowance which mirrors the current UK income tax allowance;
- a single tax rate of 3% on all income over the personal allowance;
- collection through the existing systems by HMRC;
- that there should be no exemptions or discounts, although income from savings and investments will not be taxed;
- a tax on second homes.
1.5 Domestic water charges are currently billed alongside the council tax and the Scottish Government intends to undertake separate work on the future billing and collection for these charges.
TIMING OF THE CONSULTATION
1.6 The consultation was launched on 11 th March 2008 and ran until 18 th July 2008.
NATURE OF THE CONSULTATION
1.7 The consultation document asked 24 main questions under 7 general question headings covering:
- How much local income tax will people pay?
- How will local income tax be collected and administered?
- What will be the impact of a local income tax on our economy and people?
- How will a local income tax pay for Local Authority services?
- How will empty and second homes be taxed?
- How will domestic water charges be affected?
- Are there other taxation systems that should be considered?
1.8 In addition, some extra classification information was requested within the documentation which enabled the analysis to include, for example, details of the age range of individuals, information on gender, household composition and ethnicity.
DISTRIBUTION OF THE CONSULTATION DOCUMENT
1.9 Copies of the questionnaire were issued in either hard copy or by e-mail to relevant organisations and individuals. In addition, a series of consultation meetings were held and an online response facility was made available on the Scottish Government's website.
CONSULTATION EVENTS
1.10 The Scottish Government held 2 stakeholder discussion events on the taxation of empty and second homes; these took place in Edinburgh and Inverness during July 2008. A report from these events was produced and this is summarised in appendix 2.