By David Scott in Edinburgh
The Scottish Government is to press ahead with its plans for a local income tax despite being told that there is ‘no legal basis’ for its introduction and that Revenue and Customs has no powers to collect it.
The Scottish Government is to press ahead with its plans for a local income tax despite being told that there is ‘no legal basis’ for its introduction and that Revenue and Customs has no powers to collect it.A spokesman for the Scottish Government told Public Finance this week that it would proceed with an LIT that is ‘within the legislative competence of the Scottish Parliament’ before the summer recess.
The Holyrood administration’s determination not to be diverted from its plans to replace council tax with LIT was underlined after R&C gave the strongest indication yet that it will not co-operate with a scheme it considers to be contrary to the Scotland Act.
In a letter to Scottish Government permanent secretary Sir John Elvidge, R&C chief executive David Hartnett said that while the Revenue had not seen the LIT proposals in detail: ‘There is no legal basis for a local income tax along the lines outlined in the Scottish National Party consultation document [published last year].’
Hartnett added: ‘Your proposal for a tax where the rate was set by the Executive [Scottish Government] and the proposed tax was collected and administered by HMRC is a reserved matter under the Scotland Act 1998 and therefore a matter for the UK Government.’
He told Elvidge that R&C did not have the power to collect or administer LIT. But the Scottish Government spokesman said the administration would abolish ‘the regressive council tax’.
He added: ‘The Scottish Parliament has twice agreed the council tax is discredited and we will introduce a Bill to abolish it, this parliamentary year, that will be within the legislative competence of the Scottish Parliament.’
The Scottish Government’s response is a further indication that Finance Secretary John Swinney might be prepared to opt for a ‘compromise’ scheme, favoured by the Scottish Liberal Democrats, which would allow the rate of LIT to be set by individual councils.
The Treasury indicated earlier this year that while it considered a nationally set LIT to be illegal, it believed an income tax that was locally set could be within the Parliament’s competence.
