THE COMMISSION ON LOCAL TAX REFORM

16 Glossary

BEMIS

Black and Ethnic Minority Infrastructure in Scotland. The national umbrella body supporting the development of the Ethnic Minorities Voluntary Sector in Scotland.

Buoyancy

Buoyancy in tax terminology generally refers to the change in tax revenues as a result of changes to the tax base. For example, the Council Tax base is made up of residential properties. If more properties are built, the tax base gets larger.

Buoyancy can also result from increases in the value of the tax base. For example, with income tax, if earnings increase, receipts from income tax increase. The counter to this is that if earnings fall, the size of the tax base also falls. So buoyancy can be both positive and negative.

Our definition of buoyancy refers strictly to changes in the size of the tax base and excludes changes in receipts deriving from changes in tax rates.

CAMA

Computer Aided Mass Appraisal. CAMA is a generic term for any software package used to help establish property values for property tax calculations.

CIPFA

Chartered Institute of Public Finance and Accountancy.

Council Tax Reduction scheme

The Council Tax Reduction scheme was introduced from 1 April 2013 following the UK Government’s abolition of Council Tax Benefit (CTB). Rather than being a benefit, it is a means tested schedule of reductions to individuals’ Council Tax liabilities, administered by local authorities.

COSLA

The Convention of Scottish Local Authorities

CTB

Council Tax Benefit was paid by DWP (usually directly to local authorities) to assist individuals pay their Council Tax. It was abolished by the UK Government on 31 March 2013. It was means tested and administered by local authorities.

DWP

Department for Work and Pensions.

Equalisation

Equalisation is a term more commonly used in Federations to describe the system of grants from the federal government to the states or provinces so as to allow broadly equal levels of service provision, irrespective of relative wealth, prosperity and wider circumstances, in all parts of the country.

The system of determining the amount of the General Revenue Grant paid by the Scottish Government to each local authority is also an example of equalisation. An agreed formula that takes account of many factors including population, deprivation and rurality is used to calculate the amount paid to each of Scotland’s 32 local authorities which is intended to enable each to provide their residents with public services comparable to elsewhere.

HMRC

Her Majesty’s Revenue & Customs.

IMF

International Monetary Fund.

IRRV Scotland

The Scottish branch of the Institute of Revenues, Rating and Valuation. The IRRV is a nationally approved awarding body for vocational and examination-based qualifications for professionals working in local taxation and revenues, benefits and property valuation. It also seeks to influence the course of legislative and professional matters through dialogue with government bodies and other professional organisations and through commissioning and conducting original research.

Mirrlees Review

“Tax by Design”, was the final report of a review of the UK tax system by the Institute for Fiscal Studies led by Sir James Mirrlees, published 13 September 2011, available at: http://www.ifs.org.uk/publications/5353.

OECD

The Organisation for Economic Co-operation and Development.

PAYE

In the UK, the pay as you earn (PAYE) system is a system of income tax withholding that requires employers to deduct income tax and National Insurance contributions from the salary of their employees. The PAYE system requires that employers must then remit the deducted amount to HM Revenue & Customs.

Progressive tax

“A tax is said to be progressive when the average tax rate rises as the tax base rises. So an income tax is progressive when the average tax rate rises as income rises.” – Mirrlees Review. A tax system where the (marginal) amounts paid increase as the taxable amounts increase is not enough to be progressive – the (average) tax rate itself must increase. See also “proportional tax” and “regressive tax”.

Proportional (or proportionate) tax

A proportional tax applies a flat rate for all values of the tax base. See also “progressive tax” and “regressive tax”.

Regressive tax

A regressive tax is one where the average tax rate decreases as the tax base rises. See also “progressive tax” and “proportional tax”.

SAA

Scottish Assessors Association. The Assessor is responsible for the preparation and maintenance of the Council Tax Valuation List which requires that each property’s band reflects the Assessor’s opinion of its open market value as at 1 April 1991, but taking account of its physical state and its locality as at 1 April 1993 (or for new properties, when they enter the list).

SRIT

Scottish Rate of Income Tax. The Scotland Act 2012 introduces the power for the Scottish Parliament to set a Scottish Rate of Income Tax (SRIT) from April 2016. The UK Government will deduct 10 pence in the pound at the basic, higher and additional rates of income tax on the non-savings and non-dividend (NSND) income for Scottish taxpayers, i.e. income from employment, self-employment, pensions and rental income. The Scottish Parliament will then set SRIT which will apply equally to these three rates. Scottish taxpayers will thus pay a “UK income tax” (to the value of 10 pence in the pound less than taxpayers in the rest of the UK) plus SRIT. Thus if SRIT is set at 10 pence, income tax will remain the same for Scottish taxpayers as in the rest of the UK.

SRIT will supersede the existing tax varying power, the Scottish Variable Rate (SVR) set out in the Scotland Act 1998 which gave the Scottish Parliament the power to vary up to 3 pence in the pound at the basic rate of income tax.

Tax administration

The activity of a tax authority in collecting and managing a particular tax. The administration costs of a tax to a tax authority are those incurred by the tax authority in collecting and managing the tax.

Tax avoidance

Tax avoidance is the legal use of the rules of the tax regime to reduce the amount of tax payable by means that are within the law. See also “Tax evasion”.

Tax evasion

Tax evasion is an illegal practice where a person or organisation intentionally avoids paying a tax liability. Those caught evading tax are generally subject to criminal charges and penalties. See also “Tax avoidance”.

Tax gap

The tax gap is the difference between the amount of tax due and the amount collected.

TUPE

Transfer of Undertakings (Protection of Employment) Regulations 2006; protecting employees whose business is transferred to another business.

VAT

Value Added Tax.

Withholding tax

A withholding tax, sometimes referred to as a retention tax, is a government requirement for an employer to withhold or deduct tax from the payment of income to an employee and remit the tax to the government. Income tax under the PAYE system is an example of a withholding tax, where the payment of tax is withheld from the payment of the employee’s salary and the tax payment is remitted by the employer to the tax authority.

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