The Scottish Government planned to bring forward legislation to replace the council tax with a local income tax (LIT), as part of the funding for Scottish local authorities.[1]
Different proposals to abolish council tax formed part of the manifestos of the Scottish National Party and the Liberal Democrats during the Scottish Parliament general election of May 2007. The SNP version involves the centralised distribution of funds raised from the new tax throughout the Scottish local authorities whereas the Liberal Democrats' proposal devolves the distribution to individual authorities.
The newly-reconvened Scottish Parliament narrowly backed the principle of some form of local income tax in June 2007 but left questions unanswered as to how the two proposals could be practically reconciled. Independent MSP Margo MacDonald also backs the proposal of a local income tax in principle, and her support could be important in a tight vote.
Des Browne, the then Labour Secretary of State for Scotland, said that the UK government was likely to withhold £400 million in Council Tax Benefit if the Scottish government implemented the proposals.[2]
A Scottish Service Tax was proposed as a replacement for the council tax by the Scottish Socialist Party, however the SSP lost all of its MSPs at the 2007 general election.