Rates system is unfair says Tynwald Day petitioner

David Buttery

David Buttery

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The current system of rates is unfair and a tax on property.

That’s the view of David Buttery, whose petition for redress of grievance is being investigated by a select committee – some five years after he first presented it on Tynwald Day.

But Mr Buttery’s idea for an individual local services tax, paid for by all residents of working age, was branded unworkable by the Treasury’s chief financial officer Clive McGreal.

He said Treasury’s proposal to the Council of Ministers was to replace the current outdated system of rateable values, with a system based on capital values.

Mr McGreal said there would be ‘winners and losers’ in such a move. But he revealed that a pilot study of the impact of such a system carried out in Michael and Onchan found that a few properties would see a doubling of their rates bill.

Mr Buttery, whose 2009 petition was picked up by committee chairman, Douglas West MHK Chris Thomas, said: ‘The petition was to highlight the inequality in the ratings system. I believe it’s a tax on property. Historically it was probably a good idea. That was at a time when people didn’t travel very much and used services in their area. People are very mobile these days.’

He pointed out that rateable values were based on valuations made in 1971 and claimed that properties in some areas had been deliberately under-valued. ‘I think it’s time to redress the balance,’ he told the committee.

Mr Buttery cited the example of people living in Farmhill, on the Douglas-Braddan boundary, where he said people on one side of the street may pay several hundreds of pound a year less than their neighbours on the other side. ‘That’s just one example out of hundreds of examples,’ he said.

Mr Buttery suggested that ‘stand alone’ services, such as waste, water and sewerage and housing, should be taken out of the equation and what was left paid for out of an individual local services tax.

Committee member Alfred Cannan (Michael) suggested that residents in the north and south will pay considerably more in travel costs. ‘Living out in the country you get very little in the way of services,’ he added.

Giving his evidence, Treasury official Clive McGreal was asked if the current system is unfair.

He told the committee: ‘We agree in so far as the current valuation system is outdated. Those more rural properties attract a lower rate than those in urban parts.’

He said an all-island domestic rate would be more equitable - but that would necessitate local authority reform.

Mr McGreal said: ‘There are proposals already in place to address the unfairness of the rural and town disparity in rates. I don’t think Mr Buttery’s proposal would be workable solution.’

Andrew Wallace, head of stategic asset management in Treasury, said: ‘The administration of a local services tax would be far more burdensome, far more costly than the one we currently have.’

The committee heard that Treasury’s proposals were to modernise the rating system by using capital value bandings, so a £300,000 home in Douglas would have the same ratable value as a £300,000 home in Port St Mary. The rates bill payable would still differ, however, depending on the penny in the pound rate set but individual local authorities based on the services they provide.

Mr Cannan asked if this was ‘just an exercise to get more money out of taxpayers’. ‘Is this the masterplan?’ he suggested.

Mr McGreal said rates were there to fund local authorities and introducing capital values wouldn’t help the government’s fiscal rebalancing ‘at this stage’.

He said a pilot study of 1,000 homes in Michael and Onchan showed a few homes would see a doubling of their rates bill.

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