Mackay facing scrutiny
Property tax revenues fall below Budget forecast
Derek Mackay: lower operating costs
Scotland’s property tax will come under further scrutiny after new figures show that revenue from property sales raised almost £55 million less than the Scottish Government’s estimate.
The controversial land and buildings transaction tax brought in £483.6 million in 2016-17 against budget forecast of £538m.
Ministers had anticipated collecting £671m from the two devolved taxes – LBTT and Scottish landfill tax but figures in Revenue Scotland’s annual report show that just over £633m was collected.
The figures show that the taxes raised £61m more than the previous year.
Finance Secretary Derek Mackay said: “Revenue Scotland has continued to operate effectively and efficiently, with operating costs lower than last year and more than £1 billion of tax collected over its first two years of operation.
He did not comment on the fall in income from the two property taxes.
Moira Kelly, chairman of the Chartered Institute of Taxation Scotland technical committee, said: “While Revenue Scotland has overseen increases in the overall amount of LBTT and SLfT generated, it’s impossible not to note the discrepancies between the actual amount of LBTT generated and the amount that was initially forecasted by Scottish Ministers in the budget for 2016/17.
“Forecasting is – as we often hear – a very inexact science, but these figures are likely to fuel further concerns relating to the vulnerability of LBTT receipts and the potential impact that this may have on future Scottish budgets.”
The home building industry repeated its call for the extension of the current 5% band in order to address the considerable drop in activity at the higher end of the property ladder.
Nicola Barclay, chief executive of trade body Homes for Scotland, said: “As we have expressed in submissions to the Scottish Government and Scottish Parliament, if we are to have a healthy and well-functioning housing market, we need a tax framework that enables movement up and down all price levels.
“If aspirational buyers are unable or indeed choose not to move, this will create blockages lower down and place more pressure on the price of the fewer homes that do come on the market. Not only will this distort the market, it will also ultimately exacerbate the housing crisis.”
Revenue Scotland chairman Dr Keith Nicholson said: “The total tax collected in 2016-17 shows an increase of over 10% compared to our first operating year, contributing even more to Scotland’s public services.
“An important milestone was also reached, with the amount of tax collected by Revenue Scotland in its first two years of operating exceeding £1bn. The total transferred to the Scottish Consolidated Fund between 1 April 2015, when operations began, and 31 March 2017 was £1.15bn.”
A Scottish Government spokesman said: “Transaction taxes are notoriously difficult to predict. Non-residential LBTT is volatile and strongly influenced by a few large transactions and wider economic uncertainty in the UK economy.
“The Office for Budget Responsibility’s forecasts for residential and non-residential stamp duty land tax were also optimistic for 2016-17 reflecting similarly changing market conditions in the rest of the UK.
“As the Chancellor admitted, Brexit is causing economic uncertainty right across the UK.
“This coupled with the downturn in the oil and gas sector in the North East has had an impact on Scotland’s housing market and ultimately LBTT revenues.
“As the Finance Secretary said in June, the £74 million surplus from tax receipts from 2015/16 would be held in reserve and be available to address any shortfalls in tax receipts.
“It should also be noted that, across 2015-16 and 2016-17 combined, the difference between forecast and actual revenue raised was just 3%.”