A LEADING thinktank has proposed creating a raft of new local taxes to help pay for public services, including local inheritance, payroll and carbon levies.

IPPR Scotland said Holyrood could empower councils to raise hundreds of millions of pounds a year under the existing powers of devolution.

At present, Scotland’s 32 councils have just two taxes at their disposal - council tax and business rates, which together raise around £4.5bn a year.

Although workplace parking and tourist taxes are in the pipeline, IPPR Scotland said a far more ambitious range of local taxes was possible.

In a new report, it said a “progressive” local Inheritance Tax could raise up to £200m per year if estates above £36,000 were taxed at 10 per cent.

It also suggested a payroll levy on low-paying employers to raise £600m, a “fair work supplement” on top of business rates to incentivise employers to meet fair work standards, and a carbon tax to help cut emissions.

In addition, the report said revenue from devolved income tax could be assigned to local government.

The taxes would require Holyrood legislation, but the revenues would be raised and retained by councils.

Thinktank director Russell Gunson said: “Scotland has led the way in using its powers to create a more progressive income tax system. But if we want to go further, using our older powers over local tax could be crucial.

“The Scottish Parliament is beginning to wake up to this, including through proposals for a tourist tax, but so far the ideas are small in scale.

“New taxes could see us put our money where our mouth is on the huge priorities facing Scotland. Our politicians should be far more ambitious on tax, thinking bigger to build a stronger, more progressive tax system that better narrows wealth inequalities, tackles environmental breakdown and delivers a fairer economy.

“The potential for our local tax powers has in many ways been overlooked in recent years, but in Scotland, we can do more - and we should.”

Graeme Smith, general secretary of the STUC, which helped with the report, said it showed “the enormous potential for revenue-raising within the devolution settlement”.

He said: “The report can help move us on from a sterile debate which has been focused mainly on income tax and on the limitations of the current devolution arrangements.

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“Instead we can consider international examples of how revenues can be raised and the how the role of democratically accountable local authorities enhanced.

“Fundamental to tackling poverty and inequality are well resourced public services and decent work. The report identifies how local taxes could provide much-needed funding for services whilst incentivising employers to deliver good jobs.”

Green MSP Andy Wightman said successive Scottish governments had been “too timid” to give councils the powers they needed.

He said: “Councils need more powers to raise vital funds for schools, social care and community facilities in a progressive way. This report recognises that broadening the mix of taxation in Scotland could be more politically palatable, but Green proposals to empower local authorities have been rejected and frustrated by vested interests.

“If we are to improve services and empower communities, we need the other parties to be braver on local government.”

Council umbrella group Cosla said “innovative approaches” were vital, including a power to introduce “discretionary taxes which would be determined at the local level”.

“This is a key element in our quest for greater fiscal empowerment. It must be stressed however that this is only part of the picture - local government needs a sustainable funding settlement to protect essential services.

“This cannot be ignored in the upcoming spending review.”

The Scottish Government said it welcomed the report.

A spokesperson said: “We are committed to making local taxation more progressive while improving the financial accountability of local government. Discussions around the further fiscal empowerment of local authorities are ongoing as part of our Local Governance Review. As the IPPR report notes, its aim is to outline what might be possible and pose questions for discussion and illustrative ideas for debate.

“The local tax reform measures we announced in January – should they be agreed by Parliament – will deliver the most significant fiscal empowerment of local authorities since devolution.”