2. Tax – Overview of tax revenues, BGA and net Budget position
22. 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 – LBTT and SLfT.
23. Table 2 includes outturn data for 2021-22 Scottish Income Tax and fully devolved taxes, and for 2022-23 for fully devolved taxes. Scottish tax outturn data is provided by HMRC for Income Tax and by Revenue Scotland for LBTT and SLfT. Outturn data required to calculate the outturn tax BGAs is provided by HMRC.
24. Table 2 also shows the most recent tax forecasts. Revenue forecasts are taken from the SFC’s Scotland’s Economic and Fiscal Forecasts, published on 25 May 2023. BGAs are based on forecasts of equivalent UK Government tax revenue prepared by the OBR for the UK Spring Budget published on 15 March 2023. Comparing the forecasts to the BGAs produces the net effect on the Scottish Budget.
Note 1: The outturn listed for 2021-22 is final outturn.
Note 2: 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.
Note 3: 2022-23 LBTT and SLfT provisional outturn excludes penalties and accounting adjustments applied by Revenue Scotland
Note 4: The latest Income Tax forecasts from May’s MTFS 2023 do not yet reflect the latest 2021-22 outturn data which was published in July. As such, outturn data and forecasts are currently inconsistent and will be revised at the next fiscal event. For 2022-23 and 2023-24, the net positions have been locked in at the time of each Budget and are not represented in these forecasts.
† Indicates outturn; Figures in this and subsequent tables may not sum due to rounding
25. The forecasts for Income Tax revenues and BGAs for 2022-23 and 2023-24 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. Outturn data for 2022-23 and 2023-24 will be available in the summer of 2024 and 2025, respectively. The Income Tax forecasts for the years 2024-25 onwards do not yet reflect the latest 2021-22 outturn data and updated forecasts will be produced by the SFC alongside the Scottish Budget 2024-25 and inform budget decisions.
Taxes yet to be introduced
26. Some taxes devolved in the Scotland Act 2016 are yet to be implemented: Air Passenger Duty and the Aggregates Levy.
Air Passenger Duty: 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 continue work to find a solution for aviation that remains consistent with our climate ambitions, taking account of the UK domestic subsidy control regime.
Aggregates Levy - The Programme for Government includes a commitment to a Bill setting out key arrangements for a devolved tax on the commercial exploitation of aggregates. This Bill will draw on powers in the Scotland Act 2016, and represents a key next step in Scotland’s devolved tax journey. A public consultation to inform the development of the Bill ran from September to December 2022. A stakeholder advisory group was subsequently convened from March 2023.
The British Geological Society (BGS) was commissioned in December 2021 to undertake a survey of aggregate minerals in Scotland, which provides relevant information on both reserves and the production, sales and movement of aggregate minerals in Scotland in 2019 to and from the rest of the UK and overseas. The Scottish Government will publish this report later this year. A further aggregate minerals survey (for 2023) has been commissioned in conjunction with the UK and Welsh Governments and is expected to be published in late 2024.
The exact approach to the BGA methodology is still to be agreed before the Scottish Aggregates Levy is introduced.
Assignment of revenue
Assigned VAT - The 2016 Fiscal Framework agreed that VAT assignment will be implemented following agreement between the two governments on a suitable assignment methodology.
The assignment of VAT will be based on a methodology that will estimate expenditure in Scotland on goods and services that are liable for VAT. As outlined in the updated 2023 agreement, once completed and agreed by officials, the assignment methodology and operating arrangements will be presented for joint ministerial sign-off at a future meeting of the Joint Exchequer Committee (JEC). The JEC will also agree arrangements for production of VAT revenue forecasts and a suitable point for the commencement of VAT assignment.
27. Information relating to Air Passenger Duty Tax, Aggregates Levy and Assigned VAT will be included in future Outturn Reports, following their implementation.
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