Property tax debacle blows £60m hole in SNP’s budget
A CONTROVERSIAL homes tax has left a gaping hole in the Scottish Government’s Budget after raising nearly £60million less than expected.
SNP ministers are facing growing calls to reform the Land and Buildings Transaction Tax (LBTT) amid further evidence it has crippled sections of the property market.
Official figures reveal the stamp duty replacement – which levied a 10 per cent tax on homes over £325,000 – raised £57million less than forecast in the past year.
Public services could have to be cut to cover the massive shortfall.
Property experts are calling for a lowering of the tax, which forces buyers here to pay higher rates than the rest of the UK.
David Melhuish, director of the Scottish Property Federation, said: ‘The regular LBTT residential market has not performed as well as the Government hoped.
‘You are not seeing increases in activity at the £325,000 to £750,000 level, which is where the tax rate jumps to 10 per cent – the market is static in that area.
‘If the Government changed the threshold it would help unlock a bit of activity and would help to increase the number of transactions.
‘In the last year there was a shortfall and that is a worry and underlines the fragility there. The economy is bumping along at the moment and commercial property figures probably show that.’
The new figures show residential sales raised £304million in LBTT in 2016-17, while commercial sales raised £177million. The combined total of £481million is £57million lower than the £538million target.
The SNP gained control of stamp duty in April 2015 and opted to replace it with LBTT. It became more expensive to buy properties worth more than £325,000, while those buying homes worth less than £145,000 do not pay any tax.
The Scottish Government admitted in December that LBTT was set to raise £800million less than predicted over the next four years. It said it would bring in £962million from standard residential sales – £793million lower than the original forecast of £1.75billion. Yesterday, an independent study of the tax commissioned by the Scottish Government described forecasting as ‘ill-suited’ and ‘poor’.
Scottish Tory finance spokesman Murdo Fraser said: ‘To have got this wrong to the tune of more than £800million is nothing short of incompetent. Now the experts appointed by the Scottish Government to evaluate this are exposing further embarrassment.
‘It’s no wonder the SNP got its sums so badly wrong when the proper modelling wasn’t even in place for making these forecasts.’
The Scottish Government said: ‘Our forecasts for LBTT, which is more progressive than the UK stamp duty it replaced, have been independently scrutinised and approved by the Scottish Fiscal Commission. This independent report will support the Commission’s consideration about how best to undertake forecasting of LBTT in the future.’
‘Nothing short of incompetent’