The Sunday Times is reporting today that Salmond intends to abandon LIT. What do we think of that?

Me? I'm delighted.

I thought the policy was shambolic and that Swinney left himself wide open to be shot down. We had the ludicrous notion that a Scottish Government Minister could instruct a UK Government Department (Her Majesty's Revenue and Customs) to administer Scotland's brand new LIT at the drop of a hat. We also had an estimated £400 million "black hole" that left the SG short on the funds it needed to allow Councils to deliver local services. I was personally disappointed in John Swinney as he is someone I respect when it comes to figures but this just seemed like a monumental mess to me.

He spoke about "personal allowances" (as in Income Tax) and increases to the basic and higher rates within the LIT system. My gut reaction was to think that the very mention of "increasing the higher rate" in any of the literature associated with LIT was political suicide and would send out alarming signals throughout Scotland.

Secondly HMRC is a UK Government Department and the Scottish Government has no authority to instruct that Department period. So for Swinney to suggest that HMRC would administer the whole thing was ludicrous, and that's BEFORE you even go into what would be involved for HMRC staff.

Contrary to many "facts" provided by some on Herald threads, the affairs of every Scottish taxpayer are NOT held at Centre 1. Taxpayers within PAYE who work for Scottish Employers are dealt with at Centre 1. The tax affairs of many other PAYE Scottish based people are scattered all over the UK in other tax offices. The tax affairs of self-employed Scottish taxpayers are dealt with in separate offices altogether under a system completely different from PAYE. So it was unhelpful to say the least that so many laboured long on the Herald threads insisting that it was simple process. It was anything but. Swinney was basically stating that PAYE and Self Assessment procedures could all be changed just to accommodate Scotland. All such contributions proved was how little knowledge there is about how the tax system in this country works.

What was being suggested was that "Scottish taxpayers" could simply be identified by HMRC and adjustments made to their code numbers to collect the local income tax. (Again self-employed people do not have "code-numbers".) Furthermore income tax collected by HMRC goes direct to the UK Treasury, ALL of it. So they were also being asked to separate amounts relating to LIT and remit it direct to........well I'm not sure actually, at various times it was to the Scottish Government or to the individual Council the taxpayer paid LIT to. It appeared too that some commentators were even suggesting that Employers should remit the LIT on behalf of the Scottish employee. (During my time in the Revenue the ability of some employers to operate basic PAYE was questionable never mind asking them to start deducting separate types of tax!) So again, absurd and again to ask HMRC to set up massive new administration processes left Swinney looking like he really hadn't given this enough thought.

The good thing is that the Scottish Government at least entered into consultation on the issue. My hope is they go straight back to the drawing board on it. My views are roughly as follows.

Keep LIT separate from the existing national tax system.

Administer it here using the same staff who administer the Council Tax and keep it simple.

Base it on income bands starting at 0 - £15,000 and set an annual charge for each band.

Raise the bands by, say, £5,000 or £10,000 at a time and set the charges as income increases.

Have a maximum charge.

Flat-rate charges across all Council areas and no power at Council level to vary charges up or down.

Payments to be made direct to Council Offices as Council Tax is now.

Scottish Government grants to be introduced for Councils whose populations are significantly lower than in the central belt and who consequently are unable to raise the required revenue under LIT.

One of the benefits of LIT for me is that everyone pays something. Previously the idea that only the tenant of a property or the owner of it paid towards local services seemed grossly unfair when we all use services. I also always failed to see any meaningful connection between the value of a property and the Council Tax charged when the whole thing was about services not a property tax.

I realise you are all probably thinking about the massive omission here - the charges attached to the income bands. Guilty! I am floundering there to be honest but ok for the first band I'm thinking of a flat-rate £600 per annum charge and working from there. The maximum charge I'm not sure of either. I'm thinking on Scotsgait we have a good group of mixed circumstances people and that the debate would be enlightening for all of us and I am certain we could possibly produce something more polished than you see here. But it is a debate I would very much like us to have.

If nothing else I hope you will all agree that the original model produced by John Swinney isn't workable, is much too complex and has many glaring flaws. Perhaps the SNP rushed this. So my other hope is that they produce something much better but something that is truly local and straightforward.

First I must admit that I know very little of the original LIT plan announced by Swinney, as at the time my head was in dissertation mode and there wasn't enough hours in the day to wory about much else!!

I like the model proposed here, and with everyone, not just the homeowner paying, then it should be more fairer for everyone in the system. It could also reduce the deficit that local councils would face if they didn't have the ability to raise/lower tax bands.

Should help the poor, but as with any tax system, the rich will always moan that they are 'bearing' the brunt of it!!

If anyone notices me saying anything incorrect or wrong then just say so - I am far from an expert!!

Although I think rates/council tax based on the size of your house are iniquitous I've not been convinced about local income tax. This is mainly because I'd probably have to pay more and I think that's wrong because I make very little demand on council services. That sort of brings us back to the poll tax which IMO was a good and equitable way of levying local tax IF a mechanism had been devised to give relief to those with a low income or high essential outgoings.
The main problem with council tax is that there are far too many people who don't pay it and as a result they think that the services the council provides are "free". This is of course a million miles from the truth because in addition to the actual real cost of services most councils squander many £Ms of taxpayers money on loony schemes that come to nought and plain ordinary inefficiency. Outstanding examples of the breed are Aberdeen and West Dunbartonshire. Those in receipt of "free" services will of course vote for any nutter who promises even more freebies and that results in councils being packed out with deadlegs who appoint their pals to well paid senior officer posts. The result of all this is of course disastrous.
Far better to charge for services on delivery so if it's OK to charge for a swimming pool admission why not charge for borrowing a book or a CD from a library? Why not use those who have received a CSO to sweep the streets and get benefits recipients to earn their dole by picking litter and cutting grass verges?

Clare wrote:

Secondly HMRC is a UK Government Department and the Scottish Government has no authority to instruct that Department period. So for Swinney to suggest that HMRC would administer the whole thing was ludicrous, and that's BEFORE you even go into what would be involved for HMRC staff.

Contrary to many "facts" provided by some on Herald threads, the affairs of every Scottish taxpayer are NOT held at Centre 1. Taxpayers within PAYE who work for Scottish Employers are dealt with at Centre 1. The tax affairs of many other PAYE Scottish based people are scattered all over the UK in other tax offices. The tax affairs of self-employed Scottish taxpayers are dealt with in separate offices altogether under a system completely different from PAYE. So it was unhelpful to say the least that so many laboured long on the Herald threads insisting that it was simple process. It was anything but. Swinney was basically stating that PAYE and Self Assessment procedures could all be changed just to accommodate Scotland. All such contributions proved was how little knowledge there is about how the tax system in this country works.

What was being suggested was that "Scottish taxpayers" could simply be identified by HMRC and adjustments made to their code numbers to collect the local income tax. (Again self-employed people do not have "code-numbers".) Furthermore income tax collected by HMRC goes direct to the UK Treasury, ALL of it. So they were also being asked to separate amounts relating to LIT and remit it direct to........well I'm not sure actually, at various times it was to the Scottish Government or to the individual Council the taxpayer paid LIT to. It appeared too that some commentators were even suggesting that Employers should remit the LIT on behalf of the Scottish employee. (During my time in the Revenue the ability of some employers to operate basic PAYE was questionable never mind asking them to start deducting separate types of tax!) So again, absurd and again to ask HMRC to set up massive new administration processes left Swinney looking like he really hadn't given this enough thought.

Hi Clare,
The legislation surrounding the 3p tax levy available to the Scottish Parliament states that the money is to be collected by HMRC. If you are on paye then you will have the tax code 'S'. In all cases whether paye or self employed, your personal allowance will be adjusted. This information comes from Tolley's Tax handbook. I don't have a link on the internet to this information as it came from the book itself but I'm sure if anyone wants to verify what I have said then they can find the information online. Of course, it wouldn't be easy for the HMRC to administer. I'm sure the unionists did this deliberately when they were legislating for this so if any Scottish government had the cheek to want some fiscal autonomy, it would be very hard to put into action.

The good thing is that the Scottish Government at least entered into consultation on the issue. My hope is they go straight back to the drawing board on it. My views are roughly as follows.

[b]Keep LIT separate from the existing national tax system.

Administer it here using the same staff who administer the Council Tax and keep it simple.

I think you have hit the nail on the head here Clare. We need our own tax system which we administer in a way that suits us. Sadly I don't think we will get this before independence.

Hi Meg

Thanks for that. I've been reading up on that very thing today and the costs of such a scheme are horrendous. Estimates at the time suggested something in the region of £10 million for the Revenue and £20 - £25 million in costs for employers.

I have to say I'm still extremely sceptical having worked for the Revenue for a long time and I know the administration side of it would be horrendous. If I'm honest I would also have an issue with, as always, PAYE playing the "captives" again while many of the Self Employed could continue to dodge paying their share as always. That is the other reason why I am opposed to using the existing tax system in the way envisaged. There is never any escape route for the PAYE taxpayer, they have always got us right where they want us!

The more I find out the more I feel Swinney has to keep this "clean" and a lot more straightforward without incurring additional costs all over the place.

Bolting on LIT onto an already chaotic tax system, so full of holes and unfairness, will have to be done in a manner that does not increase or exacerbate these things. Next, how do you sell LIT into the already overtaxed environment we now put up with? I do not have any answers to this political hot conundrum. Top of my list will be the association with Poll Tax, unfair fuel and energy taxation and the hundred of other complaints taxation creates piled on top.
It's a conundrum of major proportions and one that may never be solved.

Levenax wrote:
Although I think rates/council tax based on the size of your house are iniquitous I've not been convinced about local income tax. This is mainly because I'd probably have to pay more and I think that's wrong because I make very little demand on council services. That sort of brings us back to the poll tax which IMO was a good and equitable way of levying local tax IF a mechanism had been devised to give relief to those with a low income or high essential outgoings.
The main problem with council tax is that there are far too many people who don't pay it and as a result they think that the services the council provides are "free". This is of course a million miles from the truth because in addition to the actual real cost of services most councils squander many £Ms of taxpayers money on loony schemes that come to nought and plain ordinary inefficiency. Outstanding examples of the breed are Aberdeen and West Dunbartonshire. Those in receipt of "free" services will of course vote for any nutter who promises even more freebies and that results in councils being packed out with deadlegs who appoint their pals to well paid senior officer posts. The result of all this is of course disastrous.
Far better to charge for services on delivery so if it's OK to charge for a swimming pool admission why not charge for borrowing a book or a CD from a library? Why not use those who have received a CSO to sweep the streets and get benefits recipients to earn their dole by picking litter and cutting grass verges?

Hi lev

I don't know about other councils but in Edinburgh we do pay for borrowing CDs from the library and for printing from the Internet etc.

I have no ides why we do not hear more of the Council in Edinburgh, they are closing schools cutting social services, in particular in child care. They are making drastic cuts in all areas. The new council leaders discovered a black hole of over £50 M when they took over and still proceeded with the tram system. Some of the funding from that came from Scottish Government but the bill is mounting daily. Much along the lines of our parliament building. Typically we would describe this as having a fur coat and no knickers. We are now in the tourist season and the town is in chaos. The driving force behind this system stated this would be a huge tourist attraction. Somehow I find it a little hard to believe that someone in America, Japan or even other countries in EU would get exited about our tram system and book a flight.

I have no doubt the Council tax will rise dramatically.

Clare wrote:
Hi Meg

Thanks for that. I've been reading up on that very thing today and the costs of such a scheme are horrendous. Estimates at the time suggested something in the region of £10 million for the Revenue and £20 - £25 million in costs for employers.

I have to say I'm still extremely sceptical having worked for the Revenue for a long time and I know the administration side of it would be horrendous. If I'm honest I would also have an issue with, as always, PAYE playing the "captives" again while many of the Self Employed could continue to dodge paying their share as always. That is the other reason why I am opposed to using the existing tax system in the way envisaged. There is never any escape route for the PAYE taxpayer, they have always got us right where they want us!

The more I find out the more I feel Swinney has to keep this "clean" and a lot more straightforward without incurring additional costs all over the place.
I agree that the costs would be horrendous. The London government would make sure that it was badly managed and would blame the Revenue staff when it all went wrong. (Son works for the Revenue so also hear about things from the sharp end!)

Doricman I would agree that it is madness to bolt this on to the existing system. The subject itself however has to be addressed otherwise we are stuck with only one member of each household being responsible for paying a charge that is completely unfair when the funds go towards providing services everyone uses.

Lev, I take your point that you don't use many of these services however I don't use ambulances much either: it doesn't mean I object to contributing via my taxes towards the cost of having them. It is about infrastructure.

I agree too that spending by Councils is often on questionable items at a time when the money is much needed elsewhere. The point about those who pay nothing is a valid one also, a highly valid one I would say. My own view is I believe we should all pay a share and all contribute something.

Clare wrote:
....I don't use ambulances much either: it doesn't mean I object to contributing via my taxes towards the cost of having them. It is about infrastructure.

I agree too that spending by Councils is often on questionable items at a time when the money is much needed elsewhere. The point about those who pay nothing is a valid one also, a highly valid one I would say. My own view is I believe we should all pay a share and all contribute something.

Education is the biggest drain on council finances and that's as it should be. However most councils run the service in a shambolically bureaucratic way with a phenomenally highly paid Director of Education presiding over an army of pen pushers who contribute nothing to the wellbeing of schools or pupils. Many schools are underused and should be amalgamated besides which the premises lie empty for many weeks every year. The whole system needs root and branch reform to make it work better and stop wasting £Ms of taxpayers money. Most private schools are well run and efficient and manage very well indeed without the stifling leaden weight of useless administrators. We should copy their example in the public sector.
Social Work is the next biggest spender and everybody knows they consume vast amounts of cash running about after criminals and wasters whilst ignoring the plight of children in danger of abuse.

Clare wrote:
Doricman I would agree that it is madness to bolt this on to the existing system. The subject itself however has to be addressed otherwise we are stuck with only one member of each household being responsible for paying a charge that is completely unfair when the funds go towards providing services everyone uses.

Lev, I take your point that you don't use many of these services however I don't use ambulances much either: it doesn't mean I object to contributing via my taxes towards the cost of having them. It is about infrastructure.

I agree too that spending by Councils is often on questionable items at a time when the money is much needed elsewhere. The point about those who pay nothing is a valid one also, a highly valid one I would say. My own view is I believe we should all pay a share and all contribute something.

Hi Claire
This has been an informative thread

I have agreed with much of what you and Lev have said in this thread but I believe there is other ways council’s waste money. For instance, many privately owned telephone and service companies dig up our roads and leave them in a terrible mess and the councils spend hard earned tax money repairing them. It seems they do not recover the cost from the companies concerned. It is so disorganised that often they don’t know who dug up the road. Many private companies are hired to do essential work in schools and offices when it would probably be more financially viable for the council to do this work. Not long ago I complained about a private company touting for council houses to carry out wall and roof insulation. The council were paying the bill.

Surely, millions could be saved if the jobs for the boy’s situations are sorted out. No matter which tax system is used, we should sort out the basics first, Levs point about the Education department and social work departments should be first on the agenda.

I like the basic idea of Alex Salmond’s new Concordat with the councils but wonder if he has left enough room for criticism.

If we kept and used the staff who currently asses and collect Council tax this could be the nucleolus for the system we will need when we collect our own tax in the years following independence.