Revenue projections tax changes 2018-19 Budget/Green Budget deal: FOI release

FOI reference: FOI/18/01242
Date received: 26 April 2018
Date responded: 24 May 2018

Information requested

Revenue projections undertaken by Scottish Government civil servants of the tax changes included in the 2018-19 Draft Budget and subsequent revision after the Green budget deal and before the publication of the SFCs forecasts.

Response

There were three taxes to which changes were announced at Draft Budget 2018-19, each is considered in turn here:

Income Tax

Table 1: Internal Income Tax revenue estimate of Draft Budget policy

		2018/19	2019/20	2020/21	2021/22	2022/23
	Revenue Estimate (£m)	164	170	178	188	199

Table 1 shows internal SG projections for the additional revenue that would be raised from the income tax policy change announced on 14 December, at the Draft Budget. Table 2 shows the internal SG projection for the additional revenue that would be raised from the revised income tax policy, including the change to the Higher Rate Threshold announced at Stage 1. The difference between the figures in Table 1 and Table 2 shows the impact of the changes made between Draft Budget and Budget Bill. These policy costings include the impact of behavioral change.

These forecasts were produced with the SFC's model which the Commission is required to share with the Government in advance of the fiscal event, as per the protocol.

Table 2: Internal Income Tax estimate of revised policy

	2018/19	2019/20	2020/21	2021/22	2022/23
Revenue Estimate (£m)	219	228	239	252	267

Introduction of First Time Buyers Relief (FTB) to LBTT

Table 3 shows SG cost projections for the introduction of the FTB relief at a level of £175,000, as announced on 14 December at the Draft Budget. Please note that this is a static revenue estimate, and does not take account of any behavioral change and is based on current year costs.

Table 3: Internal SG static revenue loss

Proportion of first-time buyers taken out of LBTT - 80%
Annual loss in tax revenue	£5.6m

Changes to Non- Domestic Rates (NDR). There were a number of changes proposed to NDR, which I cover in turn here:

• Creation of a Business Growth Accelerator – a 12 month delay before rates apply for a new build property and a delay in increasing rates for expansion or improvements to an existing property. Policy costing (annual): £45m per annum over the long term. Additional measures to encourage speculative build £1-2 million per annum.

• Childcare provision should be supported through a new relief for nurseries Policy costing: £7 million per annum.

• Support Town Centres Through Increasing the Generosity of Fresh Start Relief. Policy costing: £2 million per annum.

• Refinement of Proposals for Fresh Start. Policy costing £0-1 million.

• Hydro Relief. Policy costing: £5 million.

• Hospitality Transitional Relief. Policy costing £21.1 million.

• Aberdeen City/Shire Office Transitional Relief. Policy costing £0.8 million.

• Land reform (shootings): Three methods have been used to upscale the income expected from shootings:

  • The central method increases Net NDR in proportion with the gross bill of the 2,000 largest shootings. This is the central method as assessors have advised the shootings still to be added are likely to be larger entries.
  • The high income method increases Net NDR in proportion with the 1,000 largest shootings.
  • The low income method increases Net NDR in proportion with the shootings tax base as a whole.

	2018-19
Final cost of relief (High)	£9.5m
Final cost of relief (Low)	£5.6m
Final cost of relief (Central)	£7.9m

Uprating the poundage with September CPI inflation instead of RPI inflation in 2018-19:

	Poundage Increase by RPI(3.9%)2018-19	Poundage increase by CPI (3.0%) 2018-19	Poundage increase by CPI (3.0%) 2018-19
Year	Poundage Rate (p)	Poundage Rate (p)	Foregone Revenue (£m)
2017/18	46.6	46.6	0
2018/19	48.4	48	-24
2019/20	50.0	49.6	-23
2020/21	51.0	50.6	-23
2021/22	52.0	51.6	-24
2022/23	53.0	52.6	-25

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