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Adam Smith Institute backs replacing Council Tax with Sales Tax

The Adam Smith Institute has an important new report out, Zero Base Policy, by their President, Dr Madsen Pirie, outlining a radical agenda for the next Government. Scroll down to page 17 for the section on local government. It includes proposals for the Council Tax (which only raises a fifth of what local government spends) to be replaced by a Sales Tax. "Those who have lived in or viisted the United States have seen how smoothly it has worked there," says Pirie. Not many cross state boundaries to pay a lower Sales Tax. To the extent they might do so more in Britain, as a smaller country, that "would spur local authorities to keep the sales tax low."

Rather than the Government collecting VAT and giving grants to councils. VAT would be cut, or scrapped, and replaced with a Sales Tax. The Sales Tax would be cheaper to collect and better reflect ability to pay than the Council Tax.

The report says to restore local democracy there is a requirement "to remove the detailed directives by which national government dictates most of the activities of local government."

Would people notice the amount they are paying with a Sales Tax? They certainly notice the Council Tax. The report proposes a referendum on the annual budget for each council.

What do you think?

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