Local councils 'should get business tax rate control', MPs argue

Date: 20th May 2009

Local councils should be given the ability to levy their own income taxes on businesses, the Central and Local Government committee has suggested.

Citing the examples of Denmark and Sweden, where councils currently raise around 70 per cent of their total income locally, the cross-party group of MPs said that wide-reaching reforms are needed to address the existing balance of power between central and local government.

Given that around 75 per cent of total council funding still comes from the central government, the committee's new report argues that councils should be given control of the business rate of income tax, thereby giving companies the ability to see how their taxation money is being used.

Dr Phyllis Starkey, who chaired the committee, claimed that such a move would enable local authorities to "vary their priorities to better reflect local aspirations".

"This flexibility should include the ability to raise more of their own money - reducing central taxation if necessary, to ensure that the overall tax burden does not increase," she said.

Publication of the report comes soon after the Federation of Small Businesses called for candidates in the upcoming European elections to focus on helping smaller enterprises and in particular pledging their support for automatic rate relief for SMEs.