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Tax Revenues (Estimated Shortfall)

– in the Scottish Parliament on 4th June 2020.

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Photo of Colin Beattie Colin Beattie Scottish National Party

4. To ask the Scottish Government what projection it has made of the estimated tax shortfall for the current financial year as a result of the Covid-19 outbreak. (S5O-04375)

Photo of Ben Macpherson Ben Macpherson Scottish National Party

As Colin Beattie will be aware, the independent Scottish Fiscal Commission is responsible for forecasting devolved tax revenues. Its most recent forecasts were published alongside the budget, prior to the pandemic, and no forecasts have been published since.

The SFC recently highlighted the considerable uncertainty about the economic and fiscal effects of the pandemic. The scale, nature and duration of economic downturn is unclear, so the effect of Covid-19 on forecasts for devolved and local tax revenues remains highly uncertain, at this point. However, as members would expect, we are working closely with Her Majesty’s Revenue and Customs, Revenue Scotland and local government to develop our understanding of the impact on tax revenues.

Photo of Colin Beattie Colin Beattie Scottish National Party

Are discussions currently being held with the UK Government to assess the implications of tax shortfalls?

Photo of Ben Macpherson Ben Macpherson Scottish National Party

Yes. We have pressed, and will continue to press, the UK Government to co-ordinate timely and targeted measures to support the key sectors in Scotland that are negatively impacted by lockdown, and to mitigate the impact on our tax revenues.

The Cabinet Secretary for Finance has made the case clearly to the Chief Secretary to the Treasury that Scotland’s public finances should not face undue risks via the fiscal framework on account of differential impacts of Covid-19, and that the UK Government needs to consider solutions to avoid that.

Photo of Jackie Baillie Jackie Baillie Labour

What estimates has the minister made of the loss of income from land and buildings transaction tax? That needs to be accounted for in the current financial year. Current reserves amount to £164 million. Will that be sufficient?

Photo of Ben Macpherson Ben Macpherson Scottish National Party

The Scottish Fiscal Commission will provide a forecast for LBTT at the appropriate time, as I highlighted in response to the initial question from Colin Beattie.

As Ms Baillie might be aware, Revenue Scotland’s statistics show that total LBTT receipts fell by £31.8 million in cash terms, or 68 per cent, between April 2019 and April 2020, as they were impacted by the pandemic. We look forward to seeing forecasts on LBTT from the SFC in due course, and we can seek to have a dialogue with Ms Baillie in more detail at that point.