Thomas Bridge 29 April 2015

Reform ‘absurd’ council tax system, urges IFS

Council tax reform is ‘urgently’ needed following the General Election if the ‘regressive’ system is to be improved, finance experts claim.

Analysing commitments from the political parties, the Institute of Fiscal Studies (IFS) has called for higher taxes on more expensive properties and sweeping changes to revaluation.

It added that ‘fixing’ the council tax system ‘would be preferable to layering a separate tax on top of it’.

However concerns were raised that no party ‘seems to have the courage’ to put forward the necessary and ‘long overdue’ changes.

The IFS added that it was unsure how many properties would be affected by Labour and Liberal Democrat plans for a ‘mansion tax’ on properties worth over £2m. Analysis of Labour proposals implies an average yearly tax of over £16,000 on properties worth over £3m.

‘Given the structure of council tax – it is regressive in that you pay a lower percentage of property value the more valuable the property, and it is capped – there is a case for reform which would increase the tax on more expensive properties,’ the IFS said.

‘We also urgently need a revaluation to end the absurd situation in which taxes in England and Scotland are based on relative values in 1991.’

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