MORE than half of Scottish households are paying the wrong council tax rates, a leading economic think tank has said.
The Institute for Fiscal Studies (IFS) published an analysis of the need for council tax reform on Wednesday, after the Scottish Government announced it would commission expert advice on how to change the system.
As it stands, households in Scotland pay council tax according to “bands”, which are allocated based on what the value of a home would have been in April 1991.
The IFS said these outdated valuations were “the most obvious problem” with council tax.
“Properties now worth similar amounts can face bills that differ by hundreds of pounds because they used to be worth different amounts in 1991,” the think tank said. “Conversely, those now differing in value by hundreds of thousands of pounds can face the same tax bill.
“This is unfair and we estimate that over half of properties are now effectively in the ‘wrong band’, in the sense that if the same number of properties were in each band but based on current rather than 1991 values, over half would be in a different band. Revaluation would address this.”
The IFS also said that the current council tax system is “highly regressive with respect to property value”.
It went on: “Making council tax less regressive with respect to property value would, on average, reduce bills for lower- and middle-income households and increase them for higher-income households.
“Under a system where tax rates were proportional to the (up-to-date) median property value in each band, for example, households in the poorest four-fifths of the income distribution would see their bills fall by £56 a year on average (with the biggest reductions for the second-poorest fifth). The top fifth would see an increase of £227, on average.
“More households would see their bills cut than increased, but there would be more very large increases than cuts: for example, while 6% would see a cut of at least £500, 10% would see an increase of at least £500.”
Finance Secretary Shona Robison has said that the SNP Government wants to make the council tax system “fairer”.
In the SNP’s 2021 Holyrood manifesto, the party committed to reforming council tax and said a citizens’ assembly would be convened to discuss the route forward.
The SNP have been pledging to reform council tax since before first taking power in 2007.
