Value-added Tax (Hansard, 18 May 1971)

§ 6. Mr. Kenneth Baker
asked the Chancellor of the Exchequer whether he has yet decided how many rates of value-added tax there will be.

§ Mr. Barber
No, Sir.

§ Mr. Baker
May I press my right hon. Friend to opt for just one rate of value-added tax? Having one rate and a zero rate means that there are two rates in practice, and if there are more than two, anomalies will proliferate. If this sort of thing happens, one of the great advantages of the tax—its fiscal impartiality—is compromised.

§ Mr. Barber
I will take into account what my hon. Friend said, but these are matters for decision nearer the time of implementation. I am aware that Norway, Denmark and Sweden have a single rate, while the practice in the E.E.C. varies from Germany's two positive rates in addition to the zero rate to France's four positive rates.

§ Mr. Marquand
Irrespective of the number of rates of value-added tax substituted for purchase tax and selective employment tax, it is bound to have a highly regressive effect, making the poor poorer and the rich richer. Will the hon. Gentleman undertake that, when the tax is introduced, if it is, compensating measures will be taken to protect those on low incomes?

§ Mr. Barber
No, Sir. As we said in the Green Paper, the effect on the cost of living of replacing purchase tax and selective employment tax by value-added tax will naturally depend on the decisions we eventually take on questions of coverage and rates, and decisions have not yet been taken on these matters.

§ 8. Mr. Douglas
asked the Chancellor of the Exchequer what is the percentage of revenue raised by the European Economic Community countries from their value-added taxes; and what is the proportion of such revenues derived from foodstuffs.

§ Mr. Maurice Macmillan
The proportions of total revenue (excluding social 1058 security contributions) derived from the tax in 1969 in the Netherlands, Germany and France were about 20 per cent., 25 per cent. and 45 per cent. respectively. Figures are not available for Luxembourg, or for the proportions derived from foodstuffs. Italy has not yet introduced a value-added tax and Belgium did so only on 1st January, 1971.

§ Mr. Douglas
Will the hon. Gentleman concede that these figures are apt to cause a great deal of disquiet if we have to accept, in joining the E.E.C., a system of value-added tax similar to those prevailing there? Are not the Government, by their policies at present. pre-empting a bargaining counter unnecessarily?

§ Mr. Macmillan
I cannot accept that latter point. The conditions in taxation, social security and other systems are so different that I do not think that one can draw the conclusions which the hon Gentleman has drawn.

§ Mr. Farr
Will my hon. Friend give a firm assurance that when value-added tax is introduced here it will not be applied to foodstuffs at any stage of their production?

§ Mr. Macmillan
My right hon. Friend and I and the other Treasury Ministers have given an absolute assurance that food, with the possible exception of those few items already subject to purchase tax, will be relieved of value-added tax. The method of so doing and the ways of doing it are under consideration. We have published a Green Paper and have not yet come to conclusions. We shall not reach our conclusions and announce them until there has been a proper amount of study.

§ Mr. Barnett
Will the hon. Gentleman answer the question, which he has still not answered? Will he make it clear that no element of value-added tax will be included in the price of food, whichever system the Government decide to adopt?

§ Mr. Macmillan
I make it clear again —it was stated in the Green Paper and has been repeated since—that food will be relieved of value-added tax. I will not go further than that until we have reached some conclusions from the study of the Green Paper.

§ 15. Mr. Dixon
asked the Chancellor of the Exchequer what proposals he is considering for the introduction of value-added tax on house purchase.

§ Mr. Maurice Macmillan
As the Green Paper on value-added tax indicates, there will be special arrangements for housing; but the exact form of these special arrangements has still to be decided.

§ Mr. Dixon
Can the Minister confirm that owner-occupiers will not have to pay tax if and when they sell their houses?

§ Mr. Macmillan
As my hon. Friend knows, there is relief for such people on capital gains tax and there is a strong case for relief from value-added tax, but the details have to be worked out after consideration of the relevant factors, including the Green Paper and the views of the many interests involved.

§ Mr. Deakins
Can the hon. Gentleman assure us that his proposals, when they are published, will not discriminate unfairly between the different types of housing in that concessions given to home owners will also apply to rented accommodation?

§ Mr. Macmillan
The hon. Gentleman will have to await further details. Naturally this type of fairness as between taxpayers is one of the major considerations in the Department.

§ 21. Mr. Warren
asked the Chancellor of the Exchequer if he will make a statement on the progress made in his consideration of the method of levy of the anticipated value-added tax.

§ Mr. Maurice Macmillan
The general scope of a possible scheme for V.A.T. is set out in the Green Paper. Consultations are proceeding and the views and suggestions offered by interested parties are being considered. It is still too early for decisions to have been taken.

§ Mr. Warren
Will my hon. Friend bear in mind that many business men, shopkeepers and hoteliers are worried about the amount of extra work which may fall upon them in implementing this tax, if it is introduced?

§ Mr. Macmillan
Yes, indeed. One of the difficulties is that some people are not quite as quick in coming forward as we 1060 expected. If my hon. Friend will get in touch with Customs and Excise, or write to me or put in touch with me any of the interested parties to whom he has talked, that would be helpful all round.