Tax - Fraser of Allander Institute Blog

Examining the economic case for a reduction in Air Departure Tax

Daniel Borbely is a PhD student in the Department of Economics. In this post he examines the potential economic impacts of a reduction in the rate of Air Departure Tax in Scotland.

Following devolution of Air Passenger Duty (APD), the Scottish Government has set out its plan to introduce a new Scottish version of the tax, the Air Departure Tax (ADT).[1] The ADT would be levied on passengers departing from Scottish airports.

As part of this, the Government has committed to reduce ADT by 50% by the end of this parliament, and abolish it, in the long-run, “when finances allow”. The aim is to increase the connectivity of Scottish airports and to make them more competitive.

But there remains debate over the evidence base to support (or argue against) the notion that cutting ADT will deliver the expected economic, budgetary and environmental benefits hoped for.Continue reading

Outturn Scottish income tax revenues 2016/17

Buried away in a technical annex to its 2017/18 Annual Accounts, HMRC last week published Non-Savings, Non-Dividend (NSND) income tax outturn data for Scotland in 2016/17.

This is the first published outturn data for Scottish NSND income tax since the Scotland Act 2016 transferred responsibility for setting the rates and bands of NSND income tax to the Scottish Parliament. It is also the first outturn data published on the basis of HMRC’s Scottish taxpayer codes.

So what does the data say?

HMRC estimates Scottish NSND outturn revenues at £10.7bn in 2016/17.

How does this compare to the latest forecasts? Continue reading

Revisions to the Scottish income tax forecasts: what has driven them, and do they matter?

In its latest forecasts, published last week, the SFC revised down its forecast for Scottish income tax revenues by £209m compared to its previous forecast in December.

In questioning the SFC on Wednesday this week, MSPs on the Finance and Constitution Committee seemed unanimously incredulous about this. That a forecast could be revised, in a relatively short period of time, by what is (in political terms) a significant sum, seemed difficult to fathom – particularly when the broader forecasts of economic output and employment had remained unchanged.

So why was the forecast revised down by £209m? Is the justification for the revisions reasonable? How significant are the revisions? And to what extent are we likely to see revisions of similar scale at future budget events?Continue reading

How should we pay for water and sewerage services in Scotland?

The design and structure of both income tax and council tax have been extensively debated in recent years. But the design of charging structures for water and sewerage services, which represent a lesser but nonetheless significant expense for many households, have received less attention.

The average household bill for combined water and sewerage services in Scotland was £360 in 2017/18. However, there is significant variation in the charge paid by different households. What are the principles on which the water and sewerage charges are based? And is the distribution of charges across households fair?Continue reading

Who is better off and who is worse off after today’s income tax announcements?

Both £33,000 and £26,000 have been quoted as the threshold below which Scottish taxpayers will pay less tax as a result of today’s tax policy announcements. But which figure is correct?