ANNEX A REVENUE METHODOLOGY
This annex outlines the methodologies used to estimate public sector revenue in Scotland. As the issue of North Sea revenue has been discussed extensively in Chapter 4, this annex focuses on all other elements of public sector revenue.
In contrast to public sector expenditure, there is no one generic approach to estimating public sector revenue in Scotland; instead each revenue stream is estimated using a separate methodology. This annex discusses these techniques. It should be noted that, as the underlying datasets used in GERS have been subject to revision and update, estimates may differ from previous editions of GERS even if the methodology has remained unchanged. Revisions to the estimates of Scottish public sector revenues from the previous edition of GERS are discussed in Annex C.
As highlighted in Chapter 3, the vast majority of public sector revenue raised in Scotland is collected at the UK level by HM Revenue and Customs.
In some cases, revenue figures can be obtained for Scotland directly. Examples include local government revenue and particular elements of public corporation revenue. Such revenues are the exception and separate identification of most other revenue streams for Scotland is not possible. GERS therefore uses a number of different methodologies to apportion revenues to Scotland. In doing so, there are often theoretical and practical challenges in determining an appropriate share to allocate to Scotland. In certain cases, a variety of alternative methodologies could be applied each leading to different estimates. A comparison of the apportionment methodologies used in this publication to the new experimental estimates by HMRC of the breakdown of taxes collected in the four countries in the UK is provided in Box 3.1.
Obtaining an estimate of public sector revenue in Scotland is a two-stage process.
In the first stage, the UK outturn figure for each element of revenue is obtained from ONS Public Sector Finances Statistical Bulletin. In the second stage, Scotland's share of the UK figure is estimated according to a specific apportionment methodology. The methodology used differs for each element of revenue. The detailed revenue methodology paper on the GERS website contains a discussion of the apportionment methodology used for each revenue stream.
UK Revenue Figures
The basis for estimating public sector revenue for Scotland is National Statistics outturn figures for UK fiscal revenue taken from ONS Public Sector Finances Statistical Bulletin. The detailed components, revenue by revenue, are taken from an ONS database (PSAT2) which is produced on a quarterly basis. The fiscal balance calculations in GERS are constrained to the UK Public Sector Finances Statistical Bulletin published in February 2014. An accounting adjustment is applied to both the expenditure and revenue totals so that both sides of the fiscal balance calculations are presented on a consistent basis. The revenue accounting adjustment is very small and has been included in 'other taxes, royalties and adjustments'.
These data are presented on an accruals basis and separately identify revenue attributed to central government, local government and public corporations. The international standards for National Accounts and Government Finance Statistics use the accruals basis rather than a cash approach. This is because accruals accounting reflects a more accurate picture of when revenue is due and spending occurs. In contrast, the alternative cash measure is more volatile as it, for example, records when bills are settled rather than when the expenditure occurs.
Summary of Apportionment Methodologies
Table A.1 provides a summary of the apportionment methodologies used for each element of revenue and highlights whether or not the methodology has changed since the previous edition of GERS.
In some instances ONS's Public Sector Finances Statistical Bulletin estimates of UK revenue for some taxes have also been revised since the last edition of GERS. These changes will affect the estimates of Scottish tax revenue. In addition, there have been revisions to some of the data sources used to apportion tax revenues to Scotland. This means that there have been small changes in the share of some UK taxes apportioned to Scotland since GERS 2011-12. Information on the scale of revisions is provided in Annex C.
More detailed information on the methodologies used and the changes introduced can be found in the Revenue Methodology paper on the GERS website.
|Income tax||Scottish share of UK income tax liabilities applied to income tax gross of tax credits. Negative expenditure on tax credits estimated using Scot/UK share of overall spend on tax credits (negative tax plus benefits)|| Survey of Personal Income (SPI): HMRC and Scottish Government analysis |
Data on overall spend on tax credits: HMRC
|Corporation tax (excl. North Sea)||Scotland's share of profits (less holding gains) of UK corporations||Regional Accounts: ONS||No|
|Capital gains tax||Actual outturns for Scotland||HMRC||No|
|Other taxes on income and wealth||Various (see web annex)||Various (see web annex)||No|
|National insurance contributions||Estimates of employer, employee, class 2 and class 3 NIC revenue in UK and Scotland||Supplied directly by HMRC||No|
|VAT|| VAT net of LG and CG refunds: Scotland's share of UK household VAT expenditure |
LG refunds: Scotland's share of UK LG current expenditure on goods and services
CG Refunds - MoD: Scotland/UK populations
- NHS: Scotland/UK TES for Health
- Other Gov depts: Scotland/UK total TES (Excluding NHS/MoD)
| Living Costs and Food Survey: ONS |
Public Sector Finances: ONS
ONS and NRS
|Fuel duties||Scotland's share of road traffic fuel consumption||Fuel consumption statistics: DECC||No|
|Stamp duties|| Land and property stamp duty: Actual outturns for Scotland |
Stocks and shares: - Scotland/UK ratio of adults owning shares
| Land and property stamp duty: HMRC |
Stocks and shares: Family Resources Survey (DWP)
|Tobacco duties||Spend on tobacco in Scotland/UK||Living Costs and Food Survey: ONS||No|
|Alcohol duties||Consumption of alcohol in Scotland/UK||Family Food Survey, DEFRA||Yes|
|Betting and gaming duties||Spend on betting and gaming in Scotland/UK||Living Costs and Food Survey: ONS||No|
|Air passenger duty||Scotland's share of passengers by air passenger duty band||Civil Aviation Authority and HMRC||No|
|Insurance premium tax||Spend on insurance Scotland/UK||Living Costs and Food Survey: ONS||Yes|
|Landfill tax||Scotland's share of UK tonnage of waste sent to landfill||Scottish Environment Protection Agency, Environment Agency, Dept. of Environment in Northern Ireland||No|
|Climate change levy|| Electricity: Scotland's share of UK electricity consumption by commercial and industrial users |
Gas: Scotland's share of UK gas sales to commercial and industrial users
Solid and other fuels: Scotland's share of UK (less extra-regio) GVA
| Electricity: DECC |
Solid and other fuels: Regional Accounts: ONS
|Aggregates levy||Scotland's share of UK's aggregate production||United Kingdom Minerals Yearbook 2012: British Geological Survey||Yes|
|Inheritance tax||Actual outturns for Scotland||HMRC||No|
|Vehicle excise duty||Scotland's share of total value of UK vehicle licences issued (less refunds)||DVLA||No|
|Non-domestic rates||Actual Data||Scottish Local Government Finance Statistics||No|
|Council tax||Actual Data||Scottish Local Government Finance Statistics||No|
|Other taxes, royalties and adjustments||Various (see web annex)||Various (see web annex)||No|
|Interest and dividends||For Public Corporation (PC) receipts: Scotland's share of public sector UK GVA||Regional Accounts: ONS||No|
|For LG and CG receipts: Scotland/UK population||ONS|
|Gross operating surplus|| CG: Scottish/UK share of central government NMCC |
LG: Scottish/UK share of local government NMCC Public corporations
- individual data for Scottish PCs
- data for UK-wide PCs based on relevant industry GVA
- and actual data for Local Authority housing rentals
| CG: ONS Regional Accounts |
LG: ONS Regional Accounts
PC: Supplied by Public Sector Finance team: ONS, and Regional Accounts: ONS
|Rent and other current transfers (excluding oil royalties and licence fees)||Various (see web annex)||Various (see web annex)||No|
|North Sea revenue||See Chapter 4||See Chapter 4||No|
Email: Mairi Spowage