Tax revenue growth disproves concerns taxpayers will relocate over Scottish tax policy, says Mackay

The combined number of higher and additional rate taxpayers in Scotland is growing at a faster rate than the rest of the UK, according to new figures.

Official statistics published by HMRC show that income tax revenues grew by 1.8 per cent to £10.9 billion in 2017-18, with growth driven primarily by an increase in contributions from higher and additional rate taxpayers – those earning above £43,000 in Scotland in 2017-18.

According to the HMRC, the provisional estimate for Scottish income tax revenue in 2018-19 is £11.7 billion – a 7 per cent increase on 2017-18. Moreover, PAYE receipts have grown faster in Scotland in 2018-19 at 5.9 per cent compared with the rest of the UK at 5.1 per cent.

The HMRC data also shows that after revisions to income tax revenues and the associated block grant adjustment, there will be a final reconciliation figure of £204 million – a reduction on the amount projected in the medium-term financial strategy.

"These statistics show that the Scottish government’s choices on taxation are helping to create a more progressive tax system at the same time as our economy is growing with low unemployment," said Finance Secretary Derek Mackay.

"Between 2016-17 and 2017-18, Scottish income tax revenue increased by £197 million, a growth of 1.8 per cent, while the number of Scottish higher and additional rate taxpayers combined, and the revenue paid by them, grew more quickly in Scotland than in the rest of the UK."

He explained that these figures demonstrate that concerns taxpayers would relocate as a result of Scottish tax policy choices were unfounded.

"While we support changes to the personal allowance, it has reduced the number of basic rate taxpayers in Scotland by a greater degree than across the rest of the UK. We have yet to receive the additional funding that should come as a result of that UK policy decision. I remain of the view that it would be beneficial for the people of Scotland if we had full control of all aspects of the income tax system," Mr Mackay added. 

He explained that while these figures show Scotland's reserves and borrowing capacity are sufficient to manage the 2017-18 reconciliation, the government will make a decision as part of the budget and spending review process on how to manage any reconciliation in a fiscally responsible way that supports "vital public services".

"However, the volatility the current system places on Scotland’s spending means the fiscal framework review must consider the current limits on the use of the reserve and borrowing powers which are clearly not fit for purpose," Mr Mackay concluded.