Local income tax 'best option' for devolution, says IFS

Local income tax 'best option' for devolution, says IFS

The Institute for Fiscal Studies (IFS) report released today states that income tax seems the most promising candidate for partial devolution.

Taking control: which taxes could be devolved to English local government? looks at the taxes currently devolved to local government in England and in other countries; sets out criteria which can be used to assess whether different taxes and tax powers are in fact suitable for devolution; applies these to a range of taxes; and looks at how much could be raised in different parts of England from different options.

Key policy messages and recommendations are included in the report, which states:

"Of the large taxes we look at, income tax seems the most promising candidate for partial devolution. Concerns about tax competition between councils and about volatility and inequality in revenues could be mitigated by restricting councils’ powers to a flat rate local income tax: a 3p tax on all income bands, for example, would raise £19bn. However, a local income tax would still involve some additional administration and compliance costs, and mean tackling a number of tricky technical issues."

"Giving councils substantial new powers over council tax – such as the ability to revalue properties in their area – could pose problems for the redistribution of funding between councils. In particular, it would make assessing the revenue raising capacity of different councils – a vital step in this process – much more difficult. It is likely to be better to revalue and reform council tax at a national level: this is overdue and could make the tax fairer and, if desired, raise more revenues."

"There is currently significant interest in tourist taxes. While such taxes would be administratively feasible and would raise useful amounts in a few well-visited areas, they would raise little money in many more places. The economic case for such a new tax is also far from clear cut."

"While tax devolution could give councils more options and discretion over how to raise funding, it is not a panacea for their funding issues. Ultimately, what’s needed is either tax increases (whether at a local or national level) or lower expectations of what councils can provide."

The report was funded by the Economic and Social Research Council, PwC, Capita and the Chartered Institute of Public Finance and Accountancy (CIPFA).

Event Diary

It is no mystery that there is a huge task at hand to solve the growing problems of waste, inefficient resources, and the disposal of hazardous materials as our communities develop.

Flexible format allows event planners to be inspired, be informed and network at their own pace

You are invited to this unique annual exhibition that brings together all the disciplines from the emergency services sector who are involved in prevention, response and recovery.