HC Deb 09 March 1971 vol 813 cc222-4
7. Mr. Moate

asked the Chancellor of the Exchequer whether the rate of value-added tax, to which the United Kingdom would be required to conform in adhering to the Treaty of Rome, has yet been agreed.

Mr. Maurice Macmillan

Not yet.

Mr. Moate

Whatever rate is decided, would it include food? Is my hon. Friend aware that following the introduction of this tax in Holland, prices rose by 5 per cent. in just three months?

Mr. Macmillan

As to the second part of my hon. Friend's supplementary question, the record of price rises in countries which moved over to value-added tax is very varied. In some countries prices rose. In some they did not. It depended on the rate and the coverage of the tax. In Europe neither the rate nor the coverage of the common Tax has been decided.

Mr. Orme

Is the hon. Gentleman aware that we are still awaiting the report which the Conservative Party put in preparation prior to the election and which has not yet seen the light of day, at least in public? When shall we have the Conservative view on the value-added tax?

Mr. Macmillan

The value-added tax is now being studied on its merits in the context of our review of the whole taxation system.

8. Mr. Moate

asked the Chancellor of the Exchequer what is his estimate of the possible cost to the United Kingdom of paying a 1 per cent. value-added tax to the Community, under the regulation of the Treaty of Rome.

Mr. Maurice Macmillan

No such estimate can be made at this stage. The Community financing arrangements envisage a contribution from Member States after 1st January, 1975, of up to 1 per cent. of a V.A.T. on a harmonised base, but this harmonised base has not yet been agreed.

Mr. Moate

An estimate was published of 1 per cent., producing a total of £230 million, in the last White Paper. Is my hon. Friend aware that the liability to pay an amount of up to £230 million would mean that the British taxpayer would be paying more to support French farmers, on this one item alone, than he would be spending on official aid to the under-developed countries? Is not that a rather distorted order of priorities?

Mr. Macmillan

I do not accept the relevance of the figures so far quoted. In practice any contribution from value-added tax depends on the harmonised coverage, which has not yet been agreed, the exact rate, which need not in fact be as high as 1 per cent., and the percentage share, which would govern our total contribution to the Community funds. None of these has yet been agreed. Therefore, any estimate which is now made can only be misleading.

Mr. Eadie

Is the hon. Gentleman aware that the British people would regard it as a piece of duplicity to have S.E.T. abolished and to have a value-added tax put in its place?

Mr. Macmillan

The Government, as the hon. Gentleman well knows, are committed to abolishing selective employment tax. We are also studying the question of a value-added tax. I do not accept that this would be regarded as duplicity. It might be disapproved of, but it would not be duplicity, because we have made our position clear on both these points.