Policy Hub
On 4 March 2004 the Chartered Institutue of Public Finance and Accountancy (CIPFA) published a report (Reviewing the case for a local income tax) which considered this possible new source of funding for local services.
Local income tax is seen as a potentially strong sustainable source of funding for local services. A major policy choice for Government would be whether to replace or supplement the council tax. Replacement would involve a significant shift in the tax base from property to personal incomes, with potential for controversy.
Supplementing the council tax with LIT could mean matching reductions in national income tax rates. The loss of income to the national exchequer could then logically be offset by scaling down the grants payable to councils.
There are 5.7 million more income taxpayers than there are council tax payers and there are also 1.5 million employers who would need to be involved in collecting a LIT.
The CIPFA paper can be viewed on the Balance of Funding Review website