Local Taxation - What is It?

Historically practitioners tend to think of "local taxation" as the following:

• rating; and,
• council tax.

A study of the history of local taxation would probably cover rating since the Poor Relief Acts of the 16th Century. (In fact it went back a  bit further in time.) Rating covered business and residential property until the community charge was introduced and suffered a swift demise; being replaced by council tax under the Local Government Finance Act 1988.

A classification of "taxes" today pobably extends beyond council tax and rating so I tend to think of a "local tax" as being any taxation or revenue device or measure where local folk can properly and lawfully dip their hands in or have to use their hands to fork out (or not) their money from their pocket or handbag.

What on earth does he (I) mean? Just that for my purposes I find it useful to think of local taxation as including the following:

• council tax;
• rating* and its "measures", eg BIDs and rating supplements(1);
• community infrastructure levy (CIL);
• various development tariffs (many of these are likely to be absorbed into CIL);
• section 106 Agrements (and the like) (but these are likely to go was CIL develops more fully);
• local authority revenues covering fees, charges, etc, ie for parking, market stalls, trading licences and the like:
• aspects of national taxation which has a direct local feature, eg the Landfill Community Fund, the Aggregates Levy Sustainability Fund.

*Rating as it is now is largely a national tax but the Localism Bill may change the balance in favour of it becoming a local tax.

Business Rates No 1 - Supplement

Although little used (so far at least) the business rates supplement (BRS) is a local tax add-on which in our straightened circumstances could possibly become popular with some higher tier local authorities.

BRS is a local tax which must be used for economic development purposes. It may be imposed under the Business Rates Supplements Act 2009 (subject to power of rejection (s 24) by the appropriate national authority). (See http://www.legislation.gov.uk/ukpga/2009/7/section/11 )

BRS is imposed on non-exempt no-domestic properties, ie those with rateable values (RVs) over £50,000. Exemptions (s 11(3)) and relief (s 15) apply under the 2009 Act to the BRS and there is provision (s 16 and sch 2) for an interaction with any levy under a Business Improvement District scheme (BID).

The one example (in London) is the Greater London Authority's BRS of 2p which contributes funds for Crossrail.   It is imposed on non-domestic properties with rateable values over £55,000 - as shown in the valuation list of April 2010. (See  http://www.london.gov.uk/crossrail-brs )

If BRS does take-off in a big way a change in the ratepayers' "say" is on the cards. At present ratepayers are able to vote on the proposals for a supplement if their a contribution will be greater than a third of the cost: this is about to change if the Localism Bill (cl 38) goes through. In future all proposals will require the consent of the majority of the ratepayers.

Council Tax 4 - Consultation - How it Works...?

Annex A of the document "Localising support for Council Tax inEngland: Consultation" (2 August 2011) describes how council tax (CT) works. It is seemingly accurate as far as it goes but what is not stated is how the valuation side of the CT business works. In short, it is moribund!

Council tax valuations (and the concomitant CT Bands) are stuck in a time warp of the early 1990s. At that time it was not common to see a dwelling worth more than say, £1 million: now they are 10 a penny!  What's more the distribution of values has vastly changed in spread and "enormity".

One imagines that Band A dwellings stand almost cheek by jowl with houses and flats worth £5m, £10m, ... £40m... etc,... etc. Because of time-value changes many will no longer reflect the extant relativities of the current banding system. The result is that "localism" is already unfair in this respect. 

As a result there are two priorities for the government:

1. revalue the 22 million dwellings in England; and,
2. review and reset the relativities of the CT Bands so that Band H is split into 10 or 20 more Bands which will more truly reflect the relative relationships in the pattern of modern capital values rather than those of about 30 years ago!

Incidentally, to be clear and fair, the total amount of council tax collected need not change as a result of the adoption of the above. The proposals merely extend the degree of fairness in the relativities already reflected in Bands A to G. The "hidden" benefits of the current system far outweigh CTBs.

http://www.communities.gov.uk/documents/localgovernment/pdf/19510253.pdf