Commission on Local Tax Reform22nd June 2015

Views of a Welsh LA and its experiences of

a Council Tax Revaluation

Nick JonesService Director (Operational Finance), Rhondda Cynon Taf Council

Characteristics of an effective Local Taxation System

Stable and modern

Progressive

Fit for purpose and meets local needs

Adequate and predictable tax yield

Acceptable to the public

Efficient, effective and economic to administer & collect

Compliance - difficult to evade

Council Tax pre-revaluation Set when Council Tax was introduced in 1993 Antecedent Valuation Date (based on sales evidence at 1st April

1991) 1,312,900 dwellings subject to council tax

Valuation Bands 1993 to 2004/05

Band A Under £30,000

Band B £30,001 to £39,000

Band C £39,001 to £51,000

Band D £51,001 to £66,000

Band E £66,001 to £90,000

Band F £90,001 to £120,000

Band G £120,001 to £240,000

Band H £240,001 and above

Distribution -1997/98

20%

26%

20%

15%

12%

4%

3%

0.2%

Why Revalue?

Properties hadn’t been revalued for 12 years Redistribution of the tax burden to maintain fairness and credibility of the

system

Valuation of dwellings for Council Tax takes account

of:- Market value at AVD

Size

Age

Property Type

Locality

Revaluation Timetable

Antecedent Valuation Date – 01/04/03

Sales Data captured by VOA – Oct ‘02 to Mar ‘03

Draft Lists compiled and deposited with LA’s – Sept ‘04

Communication to taxpayers by VOA & WG – Oct ‘04

LA’s calculate tax base for 2005/06 – Dec ’04

Valuation List deposited with LA – Jan ‘05

Council Tax bills issued – Mar’05

Revised Valuation Bands 2005

Valuation Bands 2005/06

Band A Under £44,000

Band B £44,001 to £65,000

Band C £65,001 to £91,000

Band D £91,001 to £123,000

Band E £123,001 to £162,000

Band F £162,001 to £223,000

Band G £223,001 to £324,000

Band H £324,001 to £424,000

Band I * £424,001 and above

* 9th Band introduced

Distribution (Variance)

16% (-4%)

21% (-5%)

22% (+2%)

16% (+1%)

13% (+1%)

8% (+4%)

4% (+1%)

0.9% (+0.7%)

0.4% (+0.4%)

A B C D E F G H I0%

5%

10%

15%

20%

25%

30%

19.3%

24.9%

20.2%

15.3%

12.4%

4.8%

2.9%

0.2% 0.0%

15.6%

21.5%21.9%

15.6%

12.7%

7.7%

3.6%

0.9%0.4%

Distribution of Dwellings by Council Tax Band Pre/Post 2005 Revalua-tion

2004/05 2005/06

Council Tax Band

Dist

ributi

on

Impact of the Revaluation across Wales

Overall Change 8.2% went down (107,657) 58.4% no change (766,733) 33.4% went up (438,508) 28.3% up by 1 Band (371,550) 4.4% up by 2 Bands (15,755) 0.7% up by 3 Bands or more (2,625)

NB – this reflects the change in property values between April 1991 and April 2003)

Band A Band B Band C Band D Band E Band F Band G Band H Band I-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%% Variance in Dwellings by Band after 2005 Council Tax Revaluation

Wales

Varia

nce

in B

ands

A B C D E F G H I-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

% Movement in Council Tax Band following 2005 Revaluation

WALES

Rural LA -Central

Urban LA - N East

Rural LA - N West

Urban LA S - East

City LA - S East

Urban LA - S West

Council Tax Band

Chha

nge

in %

afte

r 200

5 Re

valu

ation

Impact on the Tax Base – By Region

WALES N East N West Central S East S West0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Variance in Council Tax Base (Unadjusted) by Region 2000/01 to 2007/08

5 Year Ave (00/01-04/05)2005/062006/072007/08

Impact on the Tax Base – By Type/Region

Wale

s

Rural LA

-Centra

l

Urban

LA - N

East

Rural LA

- N W

est

Urban

LA S

- East

City LA

- S Ea

st

Urban

LA - S

West

City LA

- S W

est0%

2%

4%

6%

8%

10%

12%

14%Council Tax Base Variance (Unadjusted) by Type & Region

5 Year Ave (00/01-04/05)

2005/06

2006/07

2007/08

LA1 (SE) - WIMD#2

LA 2 (SE) - WIMD#5

LA 3 (SE) - WIMD#1

LA 4 (SE) LA 5 (SE) LA 6 (SW) - WIMD#4

LA 7 (SW) - WIMD#3

LA 8 (SE) LA 9 (SW) LA 10 (SW) Wales-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Council Tax Base Variance

5 Year Ave (00/01-04/05)

2005/06

2006/07

2007/08

SE Wales Region SW Wales Region

Impact on the Tax Base – Deprived LAs

How does revaluation affect Council Tax bills?

Revaluation is not intended to increase the overall income yield (its about redistribution)

But the impact on the amount payable by households in different LAs is difficult to predict due to:- LG settlement by WG The LAs budget for the year (spending plans) The impact of the revaluation on distribution of

dwellings across Bands within the area The assumptions made in setting the tax base Assumptions made on expected collection rates

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2005-06 at 04-05 base

£0

£100

£200

£300

£400

£500

£600

£700

£800

£900

£1,000

£0

£100

£200

£300

£400

£500

£600

£700

£800

£900

£1,000

£785.3

£860.1

£821.5

£887

£921

£887

Impact of Revaluation on Council Tax Yield and Band D Levels

Amount to be collected from the council tax (£M)

Av. Band D for Billing LA (£)

£'M

Ave. In-crease 8.8%

Ave. In-crease %

Ave. In-crease 4.5%Ave. In-

crease 7.1%

Ave. In-crease 8.1%

Ave. tax levels increase 3.9% across Wales (Range 0% to +8%)

Yield discounted by 5 YR ave. tax base growth (0.9%) and average inc. 3.8%

Revaluation – issues? Enquiries and Appeals – a non-event!

Appeals received -7,943 (1.8%) Enquiries received -16,355 Enquiries cleared -6,118

Transition Scheme Limited to properties experiencing two or more

valuation band increases (limited impact) 3 year protection No protection for 2nd homes

Is Council Tax fit for purpose? Council Tax is a hybrid tax - hastily conceived &

implemented No recognition of ability to pay - regressive At revaluation taxpayers moving up Bands may have no

increase in income – ‘asset rich, income poor’ Support for the less well off – recent reforms, are they

sustainable? No reflection of ‘consumption’ of council services Is there political will to revalue - revaluations have been

historically ‘postponed’

Outcome – the local tax becomes discredited (regardless of its merits)

Opportunities for Reform?

New Bands – number and range of values

Revise ratios of Bands (not based on 1/9ths)

National bands – are they suitable?

Frequent revaluations e.g. every 3 years?

Review current discounts inc. Single Person

Discount – reflection of its hybrid nature (33% get a

discount)

Exemptions – 4% of the potential tax base