The £42m shortfall in Swinney’s tax budget
JOHN Swinney’s controversial property super-tax will blow a £42million black hole in his own budget next year, experts have warned.
And the Office of Budgetary Responsibility (OBR) predicted that will rise further to £70million by 2020-21.
It is a damning assessment of the Land and Buildings Transaction Tax (LBTT), which was the first levied in Scotland in more than 300 years when it replaced stamp duty last April.
Gavin Brown, Tory MSP on the Finance Committee at Holyrood, said the OBR was predicting a tax take of £253million next year, compared to the Scottish Government’s calculation of £295million.
Robert Chote, of the OBR, said the government was being over-optimistic on increases to both house prices and sales over the next five years.
‘The Scottish Government is assumfinancial ing slightly more rapid increases in house prices over this period. On the transactions, the Scottish Government have a 15 per cent increase in transactions between 2020-21 and 2015-16, we have about nine,’ he said.
Mr Swinney sought to help low earners and first-time buyers by taking properties of £145,000 or less out of taxation altogether.
However, he made it more expensive to buy homes above £333,000, making it harder for families to buy houses in cities like Edinburgh and Aberdeen.
The LBTT tax bands include a 2 per cent rate up to £250,000; 5 per cent up to £325,000; 10 per cent up to £750,000; and 12 per cent on anything higher.
The OBR expects Mr Swinney to make back some losses through tax from commercial sales, with revenues expected to be £36million higher than government forecasts in 2020-21.
Yesterday, Faisal Choudhry, associate director of estate agent Savills, said the government was facing a black hole this year and even the lower OBR forecasts are overoptimistic. LBTT on residential sales was supposed to raise £235million in its first year. But it is likely to fall 20 per cent short – or £47million – according to Savills’ own figures.
Mr Choudhry believes the problem is the part of the market that is growing is the lower-priced homes where people pay little or no tax.
‘They are predicting £253million but are struggling to get £200million. They are expecting another £50million, but I don’t know where they’re going to get that from,’ Mr Choudhry said.
The Scottish Government’s own tax body has previously warned it will face an LBTT shortfall.
Professor Campbell Leith of the Scottish Fiscal Commission warned MSPs in November: ‘It may be that the change in the tax regime has permanently subdued certain parts of the market.’
The Scottish Government has rejected experts’ warnings and insists there will not be a shortfall.
A spokesman said: ‘LBTT revenues for 2015-16 remain firmly on track. Unlike the OBR forecasts, our forecast revenues from residential Land and Buildings Transaction Tax are based on an assessment of the Scottish housing market.’
‘Permanently subdued the market’