This briefing marks the second in a series looking ahead to the Holyrood elections in May. It builds on IPPR Scotland’s Better Than Before report, released in September 2020, outlining the key priorities facing the Scottish government over the next few years in recovering from Covid-19.

The briefing makes five recommendations for the next Scottish government:

1. The next Scottish government should commit to closing the tax gap in council tax revenues between Scotland and the rest of the UK, worth between an estimated £600m and £900m per year.

2. The next Scottish government should improve the progressivity of council tax by implementing higher increases on bills for properties in higher bands throughout the next parliament. Increases of 3 per cent (plus inflation) for Bands A-D and of 4 per cent, 5 per cent, 7.5 per cent and 10 per cent (plus inflation) for Bands E, F, G and H respectively each year of the parliament could raise £380m per year by 2025/26.

3. The next Scottish government should extend the council tax reduction scheme so that no one in poverty is asked to pay council tax by the end of the parliament. If in place today this could cost up to £300m per year.

4. The next Scottish government should introduce primary legislation to reform or replace the council tax within the first year of the new parliament. Our view is reform should take the form of a new percentage of value tax introduced alongside the ongoing council tax system or to replace council tax altogether. This would take many years to implement and so action should be taken quickly in the new parliament.

5. The next Scottish government should work with councils to test and introduce new local taxes in the next parliament, to build a basket of taxes at the local level in Scotland. Consideration should be given to the introduction of a local IPPR Scotland Better Than Before briefing 2 2 inheritance tax, local green taxes and other behaviour change taxes to promote fair work, just transition and to narrow economic inequalities.