Committee
Finance and Constitution Committee 05 October 2016
05 Oct 2016 · S5 · Finance and Constitution Committee
Item of business
Land and Buildings Transaction Tax
In a previous session, the committee picked up that having the ability to interrogate the data further to understand what is happening within such a broad band would be extremely useful. In paragraph 3.14, you comment on the forestalling effect in March 2016 when, because of the impact of the additional dwelling supplement, there was a jump in the tax revenues. Is it fair to say that, without that forestalling impact, the outturn would have been worse?
In the same item of business
The Convener
SNP
Item 2 is to continue to take evidence in our inquiry into the first year of operation of land and buildings transaction tax. We will have two separate sessi...
Lady Susan Rice (Scottish Fiscal Commission)
I will just say a few words. I thank the committee very much for having us at the meeting. Most of you met us during your business planning day, but we thou...
The Convener
SNP
That means that you get to answer all the hard questions, Charles.
Lady Rice
Charles Nolan is our interim appointee, approved by members, until 1 April next year. He came on board at the beginning of the summer and has jumped in with ...
The Convener
SNP
Thank you, Lady Rice. We have asked questions about the compatibility of different sets of figures in previous meetings, so your explanation of how different...
Professor Campbell Leith (Scottish Fiscal Commission)
I will take this one. As you said, three economic determinants go into the residential LBTT forecast: the average house price, the median house price and the...
The Convener
SNP
Okay. It is complicated. The forecasts were not quite where the outturn turned out to be, so where in the forecasting process did that disparity, if that is ...
Professor Leith
Table 1 in our outturn report shows exactly what we tried to do. The first column in table 1 gives details of what was forecast for the relevant economic det...
Ivan McKee (Glasgow Provan) (SNP)
SNP
Before I start, I draw members’ attention to my entry in the register of interests with respect to property investments. There is obviously quite a lot in t...
Professor Leith
There are a lot of points there; I will try to remember each of them. Table 1 does not just compare the forecast with the outturn; it tries to decompose the...
Ivan McKee
SNP
Basically, the data that I have—which I have not had time to compare to your log-normal distribution—says that the number of transactions in the £325,000 to ...
Professor Leith
The average numbers pre and post-financial crisis were a bit higher and lower. If we looked at those two relative averages, I would expect that the share wou...
Ivan McKee
SNP
Okay. Are you saying that you cannot answer the question, “Has the change to LBTT hurt the tax take to the Scottish Government?”—which I think is the key que...
Professor Leith
Yes. It is a different tax regime, so we were not expecting it to generate the same amount of tax.
Murdo Fraser (Mid Scotland and Fife) (Con)
Con
I will pursue some of the questions that Ivan McKee raised. Table 3 in your paper shows the outturn revenues compared with the forecast revenues. It is clear...
Professor Leith
Yes, that is possible. We have Revenue Scotland data only for the entire band; we do not have data on sub-bands within the band. If we had such information, ...
Murdo Fraser
Con
In a previous session, the committee picked up that having the ability to interrogate the data further to understand what is happening within such a broad ba...
Professor Leith
Yes. Transactions appear to have been brought forward into March, which was a particularly buoyant month. As the situation was not obviously as buoyant in th...
Murdo Fraser
Con
So, in the absence of that forestalling effect in this financial year and subsequently, we might expect that to disappear and a more normal pattern to appear.
Professor Leith
Yes. In the report, we look at March and then we look at April to identify whether the buoyant returns in March were sustained into April. Our tentative conc...
Murdo Fraser
Con
My final question, which goes to the heart of the matter, is about your comments in paragraph 3.24 about what has been happening in the market, particularly ...
Professor Leith
We cannot draw that definitive conclusion based on the limited data that we have at the moment. The report notes that that is the band in which revenue seeme...
Murdo Fraser
Con
At what point will we have sufficient data to be able to draw conclusions?
Professor Leith
We would need to rule out all other options. We would need to rule out the possibility that damage to the property market in the Aberdeen area is causing the...
Professor Charles Nolan (Scottish Fiscal Commission)
In principle, that could take quite a long time. Even with the additional dwelling supplement, it will be 18 months down the line before we have the final da...
Murdo Fraser
Con
You are keeping a close eye on the issue and monitoring it.
Professor Nolan
Yes. Most of the tax take comes from the top two bands so, clearly, in forecasting the tax take, you want to get those two right.
The Convener
SNP
You have just had a discussion with Murdo Fraser about the breakdown of the figures in the £325,000 to £750,000 band. We have discussed that with other witne...
Professor Leith
We requested data broken down as much as possible. The data that was received was broken down by price band. I do not know whether further breakdown would be...
The Convener
SNP
We have witnesses from Revenue Scotland next, so we can follow that up with them.