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I write in response to local government minister Nick Raynsford's remarks on local sales tax (LGC, 14 May). ...
I write in response to local government minister Nick Raynsford's remarks on local sales tax (LGC, 14 May).

A local sales tax is the best solution to local government finance. But it must genuinely replace other taxes, not just supplement them. For this reason, the Adam Smith Institute has proposed scrapping council tax and turning VAT - which raises almost exactly what is spent on local government - into a genuinely local sales tax.

Collecting a sales tax is easy, since all cash registers already calculate VAT. It is fair: everybody pays something, but wealthier people pay more because they spend more. And people are not confronted with an enormous annual bill.

To expand their tax base, councils would need to create the right conditions for local enterprise to grow. There will be constant competition between them to remain attractive to businesses and to consumers by keeping their service quality high and their costs low. This is surely healthy.

Sales taxes work well in other countries and generate heated debate on whether, where, and how much money should be spent on local services. People don't vote in local elections today because they think - with some justification - that Whitehall controls everything. If, instead, local people chose and paid for local service levels, you can be sure there would be more interest in local decisions.

Dr Eamonn Butler

Director, Adam Smith Institute

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