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Scottish Budget - Draft Budget 2017-2018 devolved taxes methodology report

Published: 15 Dec 2016
Part of:
Economy, Public sector

Report detailing the methodologies used for the devolved tax forecasts.

58 page PDF


58 page PDF


Scottish Budget - Draft Budget 2017-2018 devolved taxes methodology report

58 page PDF





3. Government Expenditure and Revenues in Scotland 2015-16



6. An estimate for forestalling behaviour was factored into the forecasts.

7. This figure is on an accruals basis has been adjusted downwards by £3 million to account for transactions recorded in 2016-17 that actually took place at the end of 2015-16.

8. PWC, A Sea Change: The future of the North Sea Oil & Gas,

9. Aberdeen and Grampian Chambers of Commerce , 25 th Oil and Gas Survey

10. See

11. The labour force, also known as the labour market participation level or economic activity level, is the total number of individuals in employment plus the number of individuals who are unemployed, that is, those actively looking for work and available to start. Many individuals may not be actively participating in the labour market due to, for example, retirement, caring for the family or home or to study. To create forecasts of employment, we project the size of the pool of individuals either in work or actively looking for work, i.e. the size of the labour force.

12. This primarily consists of earnings from employment, profits from self-employment, pensions, taxable social security benefits and income from property.

13. Source: Scottish Government's Income Tax Simulation Model and Survey of Personal Incomes ( SPI).

14. Available at Note that figures do not add up to 100% as a small share of taxpayers pays tax at the so called "savers rate" which is not reported here.

15. Table 4.1, Economic and Fiscal Outlook, November 2016.

16. Ibid. It should be noted that triple lock values for a given financial year affect the uprating of the state pension in the next financial year.

17. From the Scottish Government's core economic forecast.

18. Table 4.1, Economic and Fiscal Outlook, November 2016.

19. Full details are available at:

20. The report is available at:

21. The Scottish Government proposes to uprate the Higher Rate Threshold ( HRT) in line with inflation as opposed to the Basic Rate Limit. Due to above inflation increases in the Personal Allowance, the Basic Rate Limit (= HRT - Personal Allowance) would be lower under the Scottish Government's policy than under Statutory Indexation, i.e. uprating in line with inflation.

22. See Box 4.1, Economic and Fiscal Outlook, November 2016.

23. See Table 2.3. The full publication is available at:

24. Including revenue from the Additional Dwelling Supplement ( ADS) but excluding £9 million of revenue recorded in 2016-17 but which related to transactions in 2015-16.

25. Where the ADS has been paid and the buyer has been able to dispose of their previous main residence within an 18 month period beginning with the day after the effective date of the next main residence purchase transaction, the buyer (or their solicitor acting on their behalf) may claim a repayment of the ADS paid.

26. Further information on calculating rates and thresholds for LBTT including those applied on leases of non-residential property is available online:

27. That is, the forecasts are of the final revenues attributable to transactions in each fiscal year, once all repayments have been made. The final outturn for each year will only be fully determined 18 months after the end of the fiscal year.

28. ARIMA models are a class of model which uses historical trends in a data series to project its future values.

29. In 2015-16 data, the log-normal distribution under forecast revenues by less than 3% in periods when the house-price distribution was not distorted by forestalling activity.

30. There is evidence of strong forestalling impacts, a short-run behavioural impact whereby the timing of transactions changes in response to a change in tax rates. For example, in Figure 13 the spike in January-March 2015 is related to the introduction of LBTT on 1 April 2015, while the dip in January-March 2016 may be linked to the introduction of the Additional Dwelling Supplement on 1 April 2016.

31. The presentation of residential LBTT differs from Draft Budget 2016-17, which was based on a pre-measures and post-measures breakdown. The post-measures line included the combined effect of the additional ADS revenues as well as the reduction in standard residential LBTT revenues which was forecast to result from the introduction of ADS.

32. The data at this stage do not indicate any significant over/underperformance of different segments of the market following the introduction of LBTT, as is illustrated by Chart 13 in relation to the £325,000 to £750,000 band.

33. The Registers of Scotland quarterly house-price statistics ( which is used for the ARIMA modelling is only available from 2003 onwards. Thus housing-boom years of the early 2000s would arguable carry too much weight if a return to an unconditioned average of this dataset is hypothesised.


35. Total disposals to landfill fall to 5% of total waste arisings by 2025; and total waste arisings in 2025 reduce to 85% of the 2011 level


37. The slight discrepancy that can be observed in this table between some of these figures is due to rounding. Scottish Government analysts have taken the approach of rounding buoyancy for the purpose of the forecasts to the nearest 1 decimal place, however left the long term average of buoyancy (and therefore deviations from this average) at 2 decimal places.

38. A number of tests were conducted, including a formal ANOVA test and two ARIMA forecasting models. Some evidence of cyclicality was found but validity of these results was not judged to be sufficient due to the lack of data points.

39. We were advised that not all Assessors routinely kept records of running-roll appeals hence we were unable to repeat this exercise across the whole of Scotland.

40. Only four other properties on the Valuation Roll have comparable RVs to these two properties, excluding cumulo entries which comprise infrastructure networks - e.g. Scottish Power.