2. Tax - Overview of tax revenues, BGA and net budget position
2.1 This section provides an overview of the latest information (outturn or forecast) available regarding revenues and BGAs for income tax and the fully devolved taxes – Land and Building Transaction Tax (LBTT) and the Scottish Landfill Tax (SLfT).
2.2 Table 1 includes outturn data for Scottish income tax and fully devolved taxes for 2017-18 and 2018-19, and for 2019-20 for fully devolved taxes. It also shows the most recent forecasts and the net effect on the Budget of the differences between BGAs and revenues.
The BGAs shown in this and subsequent tables are calculated using the Indexed Per Capita (IPC) indexation method. This method in practice determines the BGAs applied to the budget. The tax BGAs are shown as negative numbers because they are a deduction from the Block Grant and thus have a negative effect on the budget position.
† Indicates outturn
Figures in this and subsequent tables may not sum due to rounding.
2.3 Revenue forecasts in this table are taken from the latest version of the Scottish Fiscal Commission’s (SFC) Scotland’s Economic and Fiscal Forecasts, published on 6 February. BGAs are based on forecasts of equivalent UK Government tax revenue prepared by the Office for Budget Responsibility (OBR) for the UK 2020 Budget on 11 March 2020. Scottish tax outturn is provided for Income Tax by HMRC, and for LBTT and SLfT by Revenue Scotland. Outturn data required to calculate the BGAs is provided by HMRC.
2.4 The forecasts for income tax revenues and BGAs for 2019-20 and 2020-21 above do not have any immediate impact on the Scottish Budget, as they do not represent outturn data that will be used as the basis for reconciliations. The forecasts from 2021-22 provide an indication of the level of revenues that the SFC anticipated before COVID-19, but these figures will not be used to set the 2021-22 Budget, as that will make use of updated forecasts that the SFC will produce for the Scottish Budget.
Taxes yet to be introduced
2.5 Some taxes devolved in the Scotland Act 2016 are yet to be implemented. In terms of taxes, these are assigned VAT, Air Passenger Duty and the Aggregates Levy.
Assigned VAT - The Fiscal Framework agreed that VAT assignment will be implemented following agreement between the two governments on a suitable assignment methodology. Prior to the Scottish Budget 2020-21, the UK and Scottish Governments agreed to extend the transitional period for VAT assignment. The VAT working group continue to work on developing a suitable methodology, including how to reflect the potential impacts of COVID.
Air Passenger Duty: Introduction of the Air Departure Tax (ADT) in Scotland has been deferred to allow the issues raised in relation to the Highlands and Islands exemption to be resolved. The Scottish Government will engage with the HM Treasury on their planned consultation on Air Passenger Duty reform and work with stakeholders to find a solution for aviation that remains consistent with our climate ambitions.
Aggregates Levy - Outstanding state aid issues related to the UK Aggregates Levy are now resolved and the UK Government review is complete. The Scottish Government will work closely with stakeholders in the coming months to consider policy options and develop the necessary evidence base to support the introduction of a devolved levy in Scotland. This will build on the research recently published by the Scottish Government.
2.6 Information relating to these taxes will be included in future Outturn Reports, following their implementation.