Tuesday, July 12, 2022
Welsh Government launch consultation on council tax reform
The long-awaited Welsh Government consultation on reforming council tax has been launched and it is pretty much as expected. As Wales on line reports, the proposal is for all 1.5m properties in Wales to be revalued, new bands created and new tax rates for each band set.
They add that options are also being discussed for new bands to be added at the top and the bottom and rolling revaluation cycles introduced. Discounts, exemptions and premiums would all be overhauled along with the Council Tax Reduction Scheme which provides support to low-income households.
The indication is that higher value properties will pay more, offsetting reductions in bills for those living in less valuable homes. That is very much in line with Professor Gerry Holtham's report for the IWA back in 2014, which I wrote about here.
He argued that property values, as assessed for council tax purposes are increasing at a much slower rate than house prices, so that the average council tax on the lowest band, whose properties are worth up to £44,000 amounts to nearly 1.9% of the value of the property. For properties worth over £424,000, the tax is just over 0.5% of capital value:
The solution proposed by the paper is not to throw out the tax altogether but to reform it so as to ‘smooth out the indexation’ and to consider introducing additional tax bands. Gerry Holtham argues that this would lead to gradual change and do away with the need for revaluation.
He argues that a fairer way to levy the tax would be to make it a flat rate plus a proportion of the value of the property, less a property allowance. That would yield similar revenue to the current tax where everybody would end up paying a fraction over 1% of the band value. In other words the tax would be rebalanced so that those in the most expensive properties would pay more.
He says that taxpayers in band D would pay a little more than a pound a week more, whilst those in band A would see their bills fall dramatically. This would lead to a fall in the cost of Council Tax benefit from £242m to just over £190m.
Gerry Holtham suggests that the increase in taxation for those in the higher bands could be ameliorated by other measures. These include removing the single occupant discount and increasing the tax on second homes, a measure already being proposed in the housing bill. In Gwynedd, 10% of the housing stock consists of second homes.
Of course we will have to see what comes out of this consultation in terms of final proposals. Contrary to the Holtham proposal, regular revaluations are being considered, and of course any change that leads to people paying more is bound to create an out-cry. Maybe Welsh Ministers will do the right thing for once, perhaps they will bottle it. We will see.
They add that options are also being discussed for new bands to be added at the top and the bottom and rolling revaluation cycles introduced. Discounts, exemptions and premiums would all be overhauled along with the Council Tax Reduction Scheme which provides support to low-income households.
The indication is that higher value properties will pay more, offsetting reductions in bills for those living in less valuable homes. That is very much in line with Professor Gerry Holtham's report for the IWA back in 2014, which I wrote about here.
He argued that property values, as assessed for council tax purposes are increasing at a much slower rate than house prices, so that the average council tax on the lowest band, whose properties are worth up to £44,000 amounts to nearly 1.9% of the value of the property. For properties worth over £424,000, the tax is just over 0.5% of capital value:
The solution proposed by the paper is not to throw out the tax altogether but to reform it so as to ‘smooth out the indexation’ and to consider introducing additional tax bands. Gerry Holtham argues that this would lead to gradual change and do away with the need for revaluation.
He argues that a fairer way to levy the tax would be to make it a flat rate plus a proportion of the value of the property, less a property allowance. That would yield similar revenue to the current tax where everybody would end up paying a fraction over 1% of the band value. In other words the tax would be rebalanced so that those in the most expensive properties would pay more.
He says that taxpayers in band D would pay a little more than a pound a week more, whilst those in band A would see their bills fall dramatically. This would lead to a fall in the cost of Council Tax benefit from £242m to just over £190m.
Gerry Holtham suggests that the increase in taxation for those in the higher bands could be ameliorated by other measures. These include removing the single occupant discount and increasing the tax on second homes, a measure already being proposed in the housing bill. In Gwynedd, 10% of the housing stock consists of second homes.
Of course we will have to see what comes out of this consultation in terms of final proposals. Contrary to the Holtham proposal, regular revaluations are being considered, and of course any change that leads to people paying more is bound to create an out-cry. Maybe Welsh Ministers will do the right thing for once, perhaps they will bottle it. We will see.
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Hi Peter, I just noticed this review of CT today as well. Hopefully we can make a useful contribution via ALTER?
Meanwhile FYI I've done a pro-LVT book pub Feb 2022 'Stop House Prices Rising'
https://www.amazon.co.uk/Stop-House-Prices-Rising-Essential/dp/1739726103/ref=sr_1_1?crid=37YIAQVWONEP1&keywords=conall+boyle&qid=1657650030&sprefix=conall+boyle%2Caps%2C78&sr=8-1
My email is conallboyle@hotmail.com these days
regards Conall
Meanwhile FYI I've done a pro-LVT book pub Feb 2022 'Stop House Prices Rising'
https://www.amazon.co.uk/Stop-House-Prices-Rising-Essential/dp/1739726103/ref=sr_1_1?crid=37YIAQVWONEP1&keywords=conall+boyle&qid=1657650030&sprefix=conall+boyle%2Caps%2C78&sr=8-1
My email is conallboyle@hotmail.com these days
regards Conall
How would 'removing the single occupant discount' ameliorate the increase in taxation for anyone?
I'm not against reform, but it sounds like it's based on the myth that house prices rises = wealth increase. When that extra wealth exists only on paper, unless the resident downsizes (if that's even an option), or takes equity out (which can leave them owning little but a large debt down the line).
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I'm not against reform, but it sounds like it's based on the myth that house prices rises = wealth increase. When that extra wealth exists only on paper, unless the resident downsizes (if that's even an option), or takes equity out (which can leave them owning little but a large debt down the line).
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