According to the report, titled, ‘How better tax policy can reduce poverty and inequality: Recommendations for an effective and accountable Scotland’, tax is an important part of the way society can reduce inequality through the redistribution of resources from one group to another.

The report highlights a package of measures that need to be taken if Scotland is to make best use of taxation to help reduce poverty and inequality.

It praised the Scottish Government’s overall approach to tax and spending as “progressive”, but added that there is scope to go significantly further and said this will be needed if it is to deliver on its ambition to tackle poverty in all its forms.

Existing Scottish Government revenue from tax relies heavily on income tax, to which the Scottish Government has made several progressive changes. Given the challenges faced in raising revenue and reducing poverty, the report said the Scottish Government needs to look at tax options as a whole and broaden its base by bringing wealth into scope of taxation in the future.

A requirement for designing better tax policy is better data on both land and property ownership and value in Scotland, the Commission said. It said the Scottish Government must ensure all land and property in Scotland is registered with a current and accurate valuation.

Currently, Council Tax is based on property values from 1991, over 30 years ago. Revaluation of domestic properties is a priority first step, to be followed by the design of a longer-term sustainable replacement for Council Tax, the Commission added.

The report also recommends that the Scottish Government seeks powers to set rates and bands of income tax for savings and dividend income for Scottish taxpayers, to allow income to be taxed at the same rate regardless of its source. In addition, it needs to start a serious appraisal of the options for the introduction of taxation of wealth in Scotland, as wealth is more unequally distributed than income and without action, this is likely to get worse over time.

Alex Cobham, commissioner of the Poverty and Inequality Commission, said: “Tax is our social superpower. It allows us to do a variety of things to live in a better society, a more equal and inclusive society, and lead better lives.

“Our report looks at the powers the Scottish Government has, and the additional powers it could have, to use tax to address poverty and inequality and help meet the 2030 child poverty targets.

“The package of measures includes recommendations on valuing land and property, reforming council tax, seeking powers to tax savings and dividends income, and broadening the tax base by seriously appraising options for taxing wealth in Scotland.

“We also need to get better at communicating with people the amount they pay and where that money goes. A lack of understanding about this undermines the sense of democratic accountability that the government has to people paying their taxes, particularly for people on low incomes.

“Although progress has been made towards reducing poverty and inequality in Scotland, with the likes of increasing the Scottish Child Payment to £25 per week, we need to see more action from the Scottish Government on tax if it is to deliver on its ambitions to meet the 2030 child poverty targets and help all those who are trapped in poverty.”

The Commission makes the following recommendations for the Scottish Government and partners to:

1. Ensure all land and property in Scotland is registered with a current and accurate valuation
2. Revalue properties subject to the current council tax, and immediately start work to design its replacement
3. Seek to devolve the necessary powers to set rates and bands of income tax for savings and dividend income for Scottish taxpayers
4. Improve public understanding of, and compliance with, devolved taxation
5. Broaden the tax base in Scotland by doing the work required to bring wealth into scope for future tax policy, and implement transparency measures on the profits of multinational companies