PROPOSALS being made by ministers to reform council tax have been criticised as being "detached from reality".

The Chartered Institute of Taxation’s Low Incomes Tax Reform Group (LITRG) made the assessment as it responded to a Scottish Government/COSLA consultation on proposals to increase the amount of tax paid by homes in the most expensive tax bands.

While the body of the tax advisers' professional organisation noted the proposal to increase the amount of tax paid by homes in council tax bands E to H would help to address the regressive nature of the council tax system, it added that it was ‘extremely disappointing’ that the measures did not include plans for a property revaluation.

It warned that a failure to do so "ignores fundamental problem with council tax – the fact that it is based on 1 April 1991 property values".

LITRG said that it would like to see a revaluation take place and for ministers to then commit to undertaking more frequent valuations, so the amount of tax paid remains tied to up-to-date property values.

In May, the Welsh Government announced that it would undertake a property revaluation, having previously done so in 2003. Council tax bills in England and Scotland remain based on 1991 values.

Joanne Walker, LITRG Technical Officer, said: “These measures will help to make council tax somewhat more progressive but without a full revaluation of properties in Scotland, it will be hard to call the tax fair. 

“New and more frequent valuations, as are happening in Wales, would help to ensure that the amount of tax paid is based on more accurate and up to date house values.

“The fact that council tax remains based on house prices from over 30 years ago means there are lots of inconsistencies in the way homes are valued.

“For the tax to be seen as being fair, it must tax the base it was meant to tax (in this case, property) and that base must be accurately valued. However, the proposal remains based on property values that are outdated, inaccurate and, in the case of homes built after 1991, hypothetical. 

“Because of this there will be a significant proportion of homes that are allocated to the wrong council tax band, meaning that these proposals will not affect all the properties they are intended to, and others that they should not.

“In that sense, it is hard to think of another tax so detached from reality”.

Low Incomes Tax Reform Group is an initiative of the Chartered Institute of Taxation (CIOT), the professional body for tax advisors, to give a voice to the unrepresented.

Set up in1998, LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation.

One of its key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities.

The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The organisation has 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Plans set out by ministers this summer would see about 750,000 households — one in four in Scotland — with properties in the highest value E to H bands - face increases to their council tax bills in addition to any annual rise.

The Scottish Government said the proposals would address criticisms that those in the lower bands pay a higher proportion compared with the value of their property than those in the higher bands.

The new plans would mean that band H homes, the highest value properties, would see an increase of about £781, or 22.5 per cent, to an average charge of about £4,251.

Council tax on band G properties would increase by around £485, or 17.5 per cent, to £3,259, band F bills would rise by £288, or 12.5 per cent, to £2,590, and band E bills by £140, or 7.5 per cent, to £2,001.

A previous change to council tax levels in 2017, when bills were increased by similar proportions, led to adjustments in the level of direct funding from the Scottish Government.

At First Minister's Questions last Thursday, Deputy First Minister Shona Robison, who took the place of Humza Yousaf while he was in New York for climate week, was asked about the prospective increases to council tax for higher band properties by Scottish Labour leader Anas Sarwar.

She told MSPs: "The consultation is looking at how we can make council tax fairer, but that joint group with the Convention of Scottish Local Authorities is also looking at how we could replace the council tax in the future. Here is one question that the

consultation is asking: why is it that someone living in a band H property pays so much less, as a proportion of the value of their property, than someone in a band A property? As someone living in a higher-band property, I do not think that that is fair."

The consultation closed on Wednesday with any new changes being introduced in the 2024/25 financial year.