Council tax is ‘highly regressive’ and leads to increasingly arbitrary tax bills, financial experts say.
A new study by the Institute for Fiscal Studies (IFS) has called for reforms to council tax, as well as reforms to inheritance tax, stamp duty, and variations in marginal income tax rates.
Council tax bands in England are still based on property values in April 1991, despite property values changing considerably over the last 30 years. This means properties are in ‘increasingly arbitrary tax bands’, according to the IFS.
In addition, the most valuable properties in 1991 attract just three times as much tax as the least valuable properties, despite being worth at least eight times as much in 1991 and typically even more now.
The poor design of council tax, in conjunction with the mechanism for allocating funding to local councils, also deepens the North-South divide, the think tank warns, by favouring London and the South East where property values are highest.
