ICAS response to ‘The Future of council tax in Scotland’ consultation

Future of council tax in Scotland: Why ICAS Is calling for a strategic, fair and evidence led approach

The Scottish government’s consultation on the future of council tax in Scotland has reignited the discussion about council tax reform and how local services should be funded. 

In our response, ICAS supports reform of the council tax system but we would welcome a broader range of options for consideration and support an evidence-based approach, including affordability and costs to inform sustainable policy choices.

Our key messages include:

• A more coherent and strategic long-term approach needs to be taken to funding pressures and tax reform, with greater clarity of direction to promote consistency and certainty for taxpayers and to mitigate unintended consequences.
• A holistic approach to taxation is needed so that the cumulative impact of different taxes on the taxpayer is transparent and considered within policy decisions.
• Policy decisions need to be evidence-based and should clearly demonstrate this.
• A broader range of council tax options should be carefully considered, costed and evaluated against objectives, including how they align with national priorities such as economic growth.
• We believe that longer-term affordability of policies deserves greater attention and clearer communication. As public finances are in a challenging position, demonstrating cost effectiveness is critical to maximising available funding for meeting service objectives.
• To promote local accountability and transparency, we strongly believe that the opportunity to update council tax legislation incudes removing the anachronism which conflates the council tax calculation and accounting purpose of financial statements. This unnecessarily impedes the preparation of simpler and more understandable accounts for local residences and taxpayers.

The big question is how to achieve sustainable public finances. Whilst reform of council tax can contribute to local government services, it will not address the funding gap alone. A more fundamental reform of local government funding is required.

Sustainable, long-term solutions require a clear strategy. Economic growth is one of the Scottish Government’s national priorities to grow successful business, encourage inward investment and broaden the tax base.

Council tax reform needs to form part of a long-term national strategy on tax and spend setting out the objectives, challenges, opportunities, plans and how this aligns with the national objective to achieve economic growth. 

As part of the tax strategy, we would like to see a high-level approach to taxation,
including the principles, direction and evaluation of the combined impact on taxpayers. This would help to provide some certainty and stability for businesses and taxpayers.

ICAS continues to advocate for simpler, more understandable public financial reporting. Statutory requirements bind local authority financial statements to funding and the council tax calculation. This creates a need to make some statutory adjustments to meet to meet both statutory and IFRS requirements. Overall, this contributes to making local authority accounts more complex and less understandable for taxpayers. We believe the council tax review provides a timely opportunity to modernise this framework, enabling clearer reporting and strengthening local accountability—principles that are central to the public interest.

The Scottish Budget recently announced two new higher value council tax bands, while the consultation was still in progress. This does not provide sufficient challenge and scrutiny and undermines the public consultation process. 

The two new bands affect less than 1% of properties which is a negligible segment and heavily positioned around Edinburgh. It’s not clear how much of the revenue will be left after the revaluation exercise, set up and on-going maintenance costs. This does not offer a meaningful opportunity for councils across Scotland to increase their revenue during a period of significant financial challenge.

Read our full response, drafted by our Public Sector Panel, with input from our Devolved Taxes Committee.

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