Alex Salmond has the wrong answer on council tax

by Douglas Carswell (September, 4 2008)

Anything Alex Salmond says seems to trigger knee-jerk hostility from some. But personally, I think he is on to something.

Salmond seems to grasp what many in the political establishment - north and south of the border - would rather ignore: the council tax system is unsustainable.

As a way of raising money to pay for local services, it's unfair. Worse, it's extraordinarily undemocratic. How a community votes in local elections has almost zero bearing on what rates of council tax them pay - and what local services are provided. With £3 out of every £4 spent by local councils coming from central government, under the current system, town halls are satellites of Whitehall.

No wonder most people no longer part in local elections. They are not apathetic. Rather they have perceptively clocked the fact that there is no real local democracy worth participating in.

If Salmond understands the problem, he is less convincing in his solution. In what sense is an across-the-board 3p surcharge on income tax, a local tax? In the jargon, it'd merely be a locally hypothecated band on top of national income tax. In plain English, it ain't local. Moreover, there would be profound problems with accountability.

My own preferred option is for a local sales tax, not a local income tax. In a paper I wrote for the Adam Smith Institute, I showed how one might convert existing VAT into a local sales tax.

My idea has several advantages over the Salmond plan: it would convert an existing national tax into a local tax; it would allow local variability; and it would encourage tax competition.

Those who object to my idea for a local sales tax often suggest Britain is "too small" for separate tax jurisdiction. Like New Hampshire or Vermont or Maine, you mean? The fact that people might be able to shop around between different county and metropolitan tax jurisdictions is one of the advantages in the scheme - not a reason against it.

Others worry it would mean a greater burden on business. Not true. Having scrapped VAT, businesses would no longer be compelled to act as an unpaid army of tax assessors for central government. The local sales tax would only be levied at the point of retail, axing a forest of paper work in the process.

Others fret that replacing VAT with a local sales tax would be incompatible with our existing EU treaty obligations. Suits me.

Commentators often suggest that the internet will have a revolutionary impact on politics - without necessarily realising what these changes will actually mean. The internet will remove barriers to entry in politics, and allow more competition, just as in business and commerce.

But it'll also "aggregate". In non-techie speak, that means bring together lots of people with common interests. When a few dozen people refuse to pay their council tax, they have a problem. If tens of thousands together refused, the state would have a problem.

However wrong it would be, a web-based council tax strike is no longer quite so unthinkable - but we must not leave it up to Alex Salmond to think up the tax's alternatives.

Published by the Telegraph here

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