Glossary of Terms

We do our best to use plain English throughout our website and publications, but sometimes we have to use more technical terms. This glossary, and list of abbreviations further down the page, will help you understand these terms. 

If you feel there are any terms missing from the glossary, please do not hesitate to contact us.

Glossary of Terms

A B C D E F G I L M N O P R S T U V

Accounting basis: also called basis of accounting; it is the time when a financial transactions is recorded. Cash basis and the accrual basis are the two primary methods of recording transactions in accounting.

Accrual basis:    is a method of recording revenues as occurring when the liability arises. The tax receipt is recorded when the transaction took place, not when the cash was paid.

Behavioural effects:       measures the impact of economics decisions of people affected by a change e.g. quantify how people react to a policy change

Buoyancy:  captures all changes in the tax base for non-domestic rates, excluding revaluation appeals. Buoyancy is measured as the annual growth in rateable value corrected for any losses as a result of revaluation appeals. It reflects both the physical growth in the tax base and also administrative effects present in the data such as the resolution of running roll appeals.

Calendar year basis: Referring to a full year period running from January 1st to December 31st.

Cash basis: is a method of recording revenues as occurring when the cash is paid. The tax receipt is recorded when the tax is paid, not when the transaction occurred.

Demand-led social security expenditure: is spending on social security benefits where spend is driven by the number of people who have a claim, based on rates and eligibility criteria set in legislation, rather than by the amount allocated in a budget.    

Devolved taxes:  are taxes whose administrations have been transferred to a devolved administration such as the Scottish Parliament.  Scotland Act 2012 gave Scottish Ministers new powers to administer some taxes such as the Land and Buildings Transaction Tax (LBTT) and the Scottish Landfill Tax.

Distribution: is a listing or function showing how often all the possible values (or intervals) of the data occur.

Economic inactivity: those individuals who are neither in employment or unemployment. Includes individuals who are studying, sick, looking after family or home and retired.

Effective tax rate: is the average rate at which a transaction, individual or corporation is taxed. Effective tax rates are especially relevant when working with progressive taxes, as different level of expenditure, income or benefit will be taxed at different rates.

Employment: an individual is in employment if they have a job, including those in self-employment. The employment level counts the number of individuals in employment. Individuals with multiple jobs are still only counted as in employment once.

Equilibrium: Used in our forecasting process to describe a state where variables have returned to long-run trend values and the output gap has closed. We do not strictly define a state of general equilibrium in the economy.

Financial year basis: Generally refers to a 4 quarter period running from April – June to January – March. Different companies and individuals may observe different financial years, but in public sector finances, this is what is generally meant.

Forecast: a considered prediction of an expected outcome. May be based on quantitative modelling and analysis, broader market intelligence and judgement.

Forecast error:  refers to the difference between a forecast and the actual value, for example, the difference between the tax revenues forecast to be raised and the tax revenues actually raised.

Forecast horizon: the period of time over which a forecast is created. The Commission produces forecasts for the next five financial years.

Forestalling: refers to behaviour changing the timing of activity around the timing of a policy change in order to either avoid paying a higher rate of tax, or to benefit from a lower rate of tax.

Growth: Generally expressed as a percentage rate, the change in the value of a variable over time. If a variable declines in value over time, this may be referred to as negative growth.

Inflation: is an increase in the general price level of goods and services. When there is inflation in an economy, the value of money decreases because a given amount will buy fewer goods and services than before.

In-year forecast : is a forecast for the current year. An in-year forecast may use data available for the current year. It is commonly used a baseline for subsequent forecasts.  For example, forecasts produced

Labour force: the sum of employment and unemployment. Describes the total potential supply of labour at the time. Also known as economic activity or participation.

Long-term: A period where variables have returned to their trends or equilibrium has been achieved. In some cases, the long-term trend levels of a variable may not be achieved within our forecast horizon.

Macroeconomic forecast: a general term referring to forecasts of a range of aggregate economic variables, for example GDP, inflation or employment.

Non-domestic property : are properties such as shops, offices, warehouses and factories and any other property not classed as a domestic property. For the purposes of non-domestic rates, the Assessors determine the classification of properties as domestic and non-domestic.

Non-residential (commercial): is any property that is not residential property.

Non-savings non-dividend income tax receipts: are tax receipts proceeding from employment income, profits from self-employment, pension income and rental profits.

Onshore GDP:   A shorthand for referring to Scotland’s GDP excluding the value of oil, gas and other hydrocarbons produced in the Scottish sector of the UK continental shelf as defined in the Scottish Fiscal Commission Act 2016. This is the same basis as the headline GDP figures published by the Scottish Government.

Output gap: The difference between measured GDP and our estimates of potential output.

Outturn data:    from a tax forecasting perspective, is the amount of taxes collected, rather than what was expected or forecast. In other words, it is the amount of taxes which 'turn out' to be collected in the financial year.

Potential Output: The maximum amount of goods and services the economy can sustainably produce without creating excessive price pressures

Poundage rate: can be thought of as the rate of tax that is applied to the rateable value of non-domestic property to calculate non-domestic rates liability, before any adjustments for reliefs or the Large Business Supplement are made.

Productivity: an amount of output for a given amount of input. In the economic forecasts productivity is defined as GDP (output) divided by total hours worked (input)

Progressive tax: a tax system where those with higher income or wealth pay higher effective tax rates

Projection: a simple estimate of the future value of a variable, often based on simple methods. May be a starting point or part of the process of creating a forecast.

Rateable value: is the legally-defined valuation of a non-domestic property which is determined by independent Scottish Assessors. It can broadly be thought of as being based on the open market rental value of the property.

Residential property: is a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for use as a dwelling; land that forms part of a garden or grounds of a building suitable for use as a dwelling. This includes any buildings or structures on such land; or an interest in or right over land that subsists for the benefit of any of the above.

Revaluation: the rateable values of non-domestic properties are revalued by Scottish Assessors on a regular basis, with these revaluations typically taking place on a 5-year cycle. The most recent revaluation took effect from April 2017.

Risk: a state where an outcome is unknown, but it is possible to quantify the probabilities of different outcomes based on either historic evidence or logic. For example, a coin toss.

Running roll appeals: are lodged by the owner/occupier of non-domestic property when they believe there is justification to have their rateable value changed on the grounds of either error, new interest, or as a result of a material change of circumstances.

Short-term: Rather than a fixed period of time, the short-term is where there continues to be a state of disequilibrium or variables are away from their trends. In the context of the Commissions forecasts, the short-term usually refers to approximately the first year of the forecasts

Slab system: is a tax regime where a single tax rate is paid on the entire taxable amount. For example, the Additional Dwelling Supplement is charged at 3% of the total value of the property.

Slice system: is a tax regime where successive sections of the taxable amount are taxed at increasing rates. For example, income tax or LBTT.

Tax bracket: is also known as tax band, and refers to the successive sections in which a tax regime is divided in.

Tax rate: is the percentage or ratio at which an individual or business is taxed.

Tone date: the assessment of all rateable value carried out by Scottish Assessors is undertaken with reference to a single date to ensure fairness. For the 2017 revaluation this date was April 1st 2015.

Uncertainty: a state where an outcome is unknown and, unlike risk, it is not possible to formally quantify the probabilities of different outcomes.

Unemployment: The official definition of unemployment, which is used in unemployment statistics, is those individuals who are actively looking for work and are available to start work in the next 2 weeks

Valuation roll:   is a public document maintained by the Scottish Assessors containing details on the rateable value of all non-domestic property in Scotland except for properties exempt from paying non-domestic rates.

Variable: a set of observations of economic or fiscal factors that may vary in value, for example GDP or tax revenues. Generally used to refer to a set of values being used in a model or forecast, for example, employment is used as a variable in the economic forecasts.

 

Abbreviations

ADS        Additional Dwelling Supplement

GDP       Gross Domestic Product

GERS     Government Expenditure & Revenue Scotland

HMRC   Her Majesty Revenue and Customs

LBTT       Land and Buildings Transaction Tax

MCC      Material Change of Circumstances

NDR       Non-Domestic Rates

OBR       Office for Budget Responsibility

RPI         Retail Price Index

SDLT      Stamp Duty Land Tax

SEPA      Scottish Environmental Protection Agency

SG          The Scottish Government

SLfT        Scottish Landfill Tax