Scottish income tax receipts £550m lower than forecast

Income tax receipts in Scotland were £550 million lower than forecast in 2016/17, new figures show.

The independent Scottish Fiscal Commission (SFC) said the shortfall was due to issues with the data, particularly the number of additional rate taxpayers.

In May, SFC estimated income tax liabilities of £11.3 billion for 2016/17.

However, final outturn figures published by HMRC show receipts were actually £10.7 billion, a difference of £550 million or 5%.

The forecasts were made using data from the 2015/16 Public Use Tape (PUT), a publicly available anonymised version of the Survey of Personal Incomes (SPI), a sample of HMRC taxpayer records.

SFC said the data was “the best available source of information on income tax liabilities for Scotland” at the time.

Its report added: “We believe most of this headline error of £550 million is because of data issues.

“Differences in the estimated number of taxpayers with higher levels of income between the PUT and outturn data appears to contribute a significant amount to the total error, in particular differences in the number of additional rate taxpayers.”

SFC said there had been “consistent overestimation” of 2016-17 income tax liabilities over the last two years by the Office for Budget Responsibility (OBR), the Scottish Government and itself “because of underlying differences between the PUT and outturn data”.

The same report notes there was a £50 million overestimate of revenue raised by business rates in a forecast made by SFC in December.

On the wider economy, SFC had forecast GDP growth in 2017/18 of 0.7%  compare to the latest data release showing growth of 1.3%.

However, the body said that despite this, average growth since 2010/11 had fallen slightly.

“The commission’s view is that these revisions provide no evidence to suggest that it would change its analysis of the underlying subdued trends in the economy,” SFC said.

Chair Dame Susan Rice added: “While the revised estimates of GDP indicate a growth rate above the commission’s most recent forecast, we believe the outlook for the economy remains largely unchanged, with trend growth in Scotland remaining subdued.

“Data revisions are a natural part of measuring the economy and producing forecasts.

“They help us to build a more accurate picture of what’s happening in the economy and we look forward to reflecting this new information in our models as we prepare our forecast to inform the Scottish Budget for 2019/20.”

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