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Local Taxation

Part of the debate – in the House of Commons at 5:34 pm on 4th July 2005.

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Photo of Philip Dunne Philip Dunne Conservative, Ludlow 5:34 pm, 4th July 2005

The hon. Gentleman says that the Inland Revenue could be notified once a year, but it would surely have to change the tax coding during the year if a person moved more than once. That point is not taken into account.

The Liberals claim that the Chartered Institute of Public Finance and Accountancy has come to their aid on the point about administration, but it said on 4 March 2004 in its review of the case for a local income tax that

"assuming a variable LIT rate, we have estimated the additional compliance burden"— on business—

"to be £100 million, based on additional time devoted to administering a large number of annual coding variations".

CIPFA also noted that it would take as long as five years for employers to introduce the necessary changes to their own coding structures and to be ready for the introduction of such a tax. I do not think that CIPFA has helped the Liberal Democrats' case unless they want to impose further administrative costs on business. That may well be the case.

CIPFA has also considered the issue of equalisation and the same report says:

"LIT would . . . place greater demands on the need for resources equalisation between areas . . . As a consequence, there is a possibility that although the perverse effect of high gearing on the overall average tax rises would be reduced, the ratios for a number of individual authorities could grow wider."

In effect, there would be increasing demands in different authorities for more central Government intervention. That is precisely what many of us are trying to avoid in the existing council tax scheme.

For those reasons, a local income tax would be exceptionally difficult and would not achieve the laudable aims that the Liberal Democrats might originally have set for it.