Fiscal framework outturn report: 2022
The Fiscal Framework Outturn Report 2022 publishes outturn and reconciliation information for Scottish Income Tax, Scottish Landfill Tax, Land and Buildings Transaction Tax and devolved Social Security benefits, as well as updates on borrowing and the Scotland Reserve.
2. Tax – Overview of tax revenues, BGA and net Budget position
12. 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.
13. Table 1 includes outturn data for 2020-21 Scottish Income Tax and fully devolved taxes, and for 2021-22 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.
14. Table 1 also shows the most recent tax forecasts. Revenue forecasts are taken from the SFC’s Scotland’s Economic and Fiscal Forecasts, published on 31 May 2022.[4] BGAs are based on forecasts of equivalent UK Government tax revenue prepared by the OBR for the UK Spring Statement published on 23 March 2022. Comparing the forecasts to the BGAs produces the net effect on the Scottish Budget.
| Outturn | Forecasts | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020-21 | 2021-22 | 2022-23 | 2023-24 | 2024-25 | 2025-26 | 2026-27 | 2027-28 | ||
| Income Tax | Revenue | 11,948 † | 13,342 | 14,386 | 15,143 | 15,954 | 16,754 | 17,484 | 18,298 |
| BGA1 | -11,852 † | -13,684 | -14,813 | -15,502 | -15,883 | -16,737 | -17,534 | N/A | |
| Net effect | 96 † | -342 | -428 | -359 | 71 | 18 | -50 | N/A | |
| LBTT | Revenue | 517 † | 807 †* | 797 | 821 | 849 | 886 | 932 | 987 |
| BGA1 | -397 † | -679 † | -716 | -741 | -772 | -807 | -854 | N/A | |
| Net effect | 121 † | 127 † | 81 | 80 | 77 | 79 | 78 | N/A | |
| SLfT | Revenue | 107 † | 125 †* | 121 | 95 | 94 | 75 | 16 | 17 |
| BGA1 | -87 † | -102 † | -81 | -81 | -75 | -69 | -76 | N/A | |
| Net effect | 20 † | 23 † | 41 | 14 | 19 | 6 | -59 | N/A | |
| TOTAL | Revenue | 12,572 † | 14,274 | 15,304 | 16,058 | 16,897 | 17,716 | 18,433 | 19,303 |
| BGA1 | -12,335 † | -14,465 | -15,610 | -16,324 | -16,730 | -17,612 | -18,464 | N/A | |
| Net effect | 237 † | -191 | -306 | -265 | 167 | 103 | -31 | N/A | |
| Note 1: The BGAs shown in this and subsequent tables are calculated using the Indexed Per Capita (IPC) indexation method. This method determines the BGAs applied to the Budget. Tax BGAs are shown as negative numbers as they are deductions from the Block Grant and thus have a negative effect on the Budget position. * 2021-22 provisional LBTT and SLfT revenue represents tax revenue submitted during the financial year adjusted by returns received in April and May 2022 that relate to the property and landfill transactions occurring in 2021-22. The revenue also excludes penalties, interest charged and paid during the financial year 2021-22. † Indicates outturn; Figures in this and subsequent tables may not sum due to rounding | |||||||||
15. The forecasts for Income Tax revenues and BGAs for 2021-22 and 2022-23 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 2021-22 and 2022-23 will be available in the summer of 2023 and 2024, respectively. The forecasts for the years 2023-24 onwards provide an indication of the level of revenues that the SFC anticipates, but these figures will not be used to set the Scottish Budget 2023-24, as that will make use of updated forecasts produced by the SFC.
Taxes yet to be introduced
16. Some taxes devolved in the Scotland Act 2016 are yet to be implemented: assigned VAT, Air Passenger Duty and the Aggregates Levy.
17. Assigned VAT: The Fiscal Framework agreed that VAT assignment will be implemented following agreement between the two governments on a suitable assignment methodology. Due to the reliability of VAT receipt forecasting being highly uncertain as a result of to the combined effects of COVID-19 and EU exit, in October 2020 the UK and Scottish governments agreed that how and when VAT assignment should be implemented should be established as part of the review of the Scottish Government’s Fiscal Framework. The Fiscal Framework review will begin following the completion of the independent report on BGA arrangements, which will be returned to both governments by the end of October. The Scottish Government has also stated that it wants the full devolution of VAT to be considered in the review. In 2020-21, the Scottish and UK Governments worked together to progress the draft VAT assignment methodology with the aim of delivering the best model and implementation process.
18. 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.
19. Aggregates Levy: The Programme for Government 2022-23 includes a commitment to a Bill setting out key arrangements for a devolved tax on the commercial exploitation of aggregates. The Bill, to be introduced in the current session, will use powers devolved in the Scotland Act 2016, and represents an important next step in Scotland’s devolved tax journey. To help inform development of the Bill, the Scottish Government will conduct a consultation and stakeholder engagement in Autumn 2022.
20. Information relating to these taxes will be included in future Outturn Reports, following their implementation.
Contact
Email: rebecca.mcewan@gov.scot
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