Date lodged: 21 September 2018
To ask the Scottish Government, further to the answers to questions S5W-17434 and S5W-17435 by Derek Mackay on 16 July 2018, what its position is on whether (a) the Scottish Fiscal Commission data suggests that behaviour effects and tax motivated incorporations will result in a £0.6 billion loss in revenue over the next five years, when considering 2018-19 income tax policy recosting revenues, and (b) there are almost 17,000 fewer higher and additional rate taxpayers than previously thought, and whether, when considering these two points, Scotland is already past the peak of its Laffer curve.
Answered by: Derek Mackay 2 October 2018
Although the Scottish Fiscal Commission (SFC) expects behavioural effects to reduce the yield from our 2018-19 policy by £0.3 billion, their forecasts clearly show that they expect the Scottish Government’s income tax reforms will still deliver an additional £1.2 billion over the next 5 years (see Table 3.7 in their May forecast ). This is consistent with the Scottish Government’s view that the Scottish taxpayer population is not past the peak of the Laffer curve.
Income tax outturn data for the financial year 2016-17 - when Scottish and UK income tax policies were the same - indicated that there were 17,000 fewer higher and additional rate taxpayers than forecast by the SFC in May 2018 (see Table 3.2 of their Forecast Evaluation Report ). While this will have implications for the SFC’s future forecasts, we still expect our income tax reform to provide additional resources for investment in vital public services and the economy.