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Scottish Local Government Financial Statistics 1998-1999

Section 3: LOCAL TAXES

Local taxes are an important element of financing for local authorities accounting for a quarter of all Scottish local authority revenue income. There are essentially two different types of tax levied by local authorities, domestic taxes (council tax) and non-domestic taxes (non-domestic rates — NDR).

Domestic Taxes

Council tax accounts for about 11 per cent of local authority revenue income. Local assessors place each dwelling into a band according to its estimated value in 1991. There are 8 bands: A is the lowest and is for dwellings valued at less than £27,000 while H, the highest, is for those valued at over £212,001. Each local authority then sets the amount of council tax payable by residents of band D properties within its area and for each other band a given proportion of band D tax is payable.

Certain discounts and benefits are available to particular types of people, such as students, people with low incomes and people living alone. Some dwellings can also be considered to be exempt from council tax either for a limited period or indefinitely. Many of these property exemptions apply to unoccupied dwellings but there are also exemptions for dwellings where all of the residents are students or are under 18 years of age, or for example where the dwelling is being used by the armed forces.

Non-Domestic Taxes

Non-Domestic Rates (NDR) have survived in much the same form for many years alongside a number of revisions to the domestic tax system. Each non-domestic property’s Rate Bill is calculated on the basis of its Rateable Value and the prevailing Rate Poundage. These are explained below:

Most non-domestic properties are valued by local assessors, the last valuation was at April 2000 (based on the value in 1998). An appeal system is in place for rate payers who believe that their property has been incorrectly valued. For certain industries (principally the former nationalised industries) the normal statutory basis of rating valuation has been suspended by law and a precisely defined statutory formula has been substituted. Properties that have been valued in this way are known as formula valued subjects.

The rate poundage is the rate of property tax expressed in terms of pence in the pound; it is applied to the rateable value of a property to give the rate bill. Until 1989 local authorities set the rate poundage, but in 1989 the Secretary of State for Scotland took responsibility for the rate poundage. Between 1990 and 1994 the Secretary of State set rate poundages for each local authority area with the aim that rate poundages would converge on a single all-Scotland poundage. Following the 1995 revaluation of non-domestic rates in Scotland a single all-Scotland poundage was set. Subsequently the poundage has been updated annually on the basis of the retail prices index in September of the preceding year. The poundage for 2000/01 was set with the aim of ensuring that non-domestic rate income remained unchanged, in real terms, as a result of the 2000 revaluation.

The figures in Table 13 are shown net of reliefs. Relief arrangements apply to empty property, charities, police premises and premises used for religious worship. In addition, Transitional Relief assists businesses which have a large increase in their bill following a revaluation.

Each council, having collected its taxes, pays its non-domestic rates into a central pool. The funds in the pool are then redistributed amongst authorities on the basis of population.

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