§ Mr. HigginsI beg to move, Amendment No. 182, in page 11. line 20, at end insert:
'at the same rate as that at which the tax to be reduced would be chargeable but for the reduction'.Perhaps it would be for the convenience of the House, Mr. Deputy Speaker, if we were at the same time to consider Amendment No. 183.
§ Mr. Deputy Speaker (Mr. E. L. Mallalieu)Yes, if the House so wishes.
§ Mr. HigginsI am much obliged. I think that there is some danger that the air of euphoria which has pervaded the Chamber for the last few minutes may continue on this Amendment, too. I may be mistaken, but I think that that may be so since this change also results from undertakings which my right hon. Friend the Chancellor gave in Committee on the Floor of the House. This matter is largely, though not entirely, related to the matter which wed is cussed yesterday regarding the scheme for second-hand works of art, though its scope is somewhat wider than just the provision of help in that particular regard.
Before I explain the Amendment itself, I must respond to a point which my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) made yesterday. He rightly took me to task for referring, for reasons of brevity rather than anything else, to the London art market, pointing out that I should have referred to the international art market based on London. I was only too ready to use that expression, but, as I left the Chamber after that debate, I was stopped by 1653 another of my hon. Friends who said that there was altogether too much emphasis on London and there was a great deal of activity in the art market in his constituency as well.
I am now somewhat at a loss to know what to do, and I think that the best answer is to refer to "our international art market". That will be sufficiently comprehensive, I am sure. If, from time to time, I slip back by mistake to the expression "the London art market", I hope that my hon. Friend the Member for Bristol, West will forgive me.
§ Mr. Robert CookeIt is certainly our art market, and we want to keep it so.
§ Mr. HigginsIndeed, and we want it to remain ours. That is largely what motivated my right hon. Friend in giving consideration to a system for the taxation of works of art on the margins, out of which this Amendment has arisen.
During the discussions between Committee and Report, it became apparent that the vires in Clause 14, the Clause concerned with special schemes for second-hand goods being taxed on the dealer's margin instead of on the full value, needed adjustment to cater fully for the schemes for second-hand goods which were being developed.
I come now to the two Amendments. Amendment No. 182 deals with subsection (2) of the Clause. The current draft of this subsection does not cater for a change in tax rate between the first and second supplies—these are technical expressions—regardless of the goods concerned. This Amendment remedies that.
Now, Amendment No. 183. The proposed new subsection (3) will enable the special schemes to make provision regarding imports. This is required essentially for works of art but it is not restricted to them. It will not need to be exercised in respect of some items, such as second-hand cars, because they are subject to purchase tax now and second-hand cars will need to be taxed at import; but the powers may also be required if a special scheme is adopted, for example, for race horses.
The proposed new subsection (4) is designed to enable relief to be given to the supply of goods in a dealer's stock on 1654 1st April, 1973. The original draft could have been thought to imply that the previous supply—using these terms in the sense in which they were used in Committee—had taken place at a time when the tax was in operation. The revised subsection avoids that implication.
The Amendment to subsection (5) is technical, arising from the proposal to make the tax on business cars non-deductible. I do not imagine that the House will wish to be wearied with the details of it.
We discussed this matter at some length yesterday. This is the consequential change, for the reasons which I stated yesterday, and I hope that the House will accept it.
§ Mr. Robert CookeI am grateful for what my hon. Friend the Financial Secretary said. Whatever phrase he decided to use we are at one on the matter. Perhaps "international art market based on Britain" would be the way of describing it. I hope that none of those who use the international market in Britain will be put off when they find, because of what they may regard as our slightly dotty domestic tax system, that we have to describe some of the great art masterpieces of the world, whether pictures, furniture or anything else as second-hand goods. I hope my hon. Friend will confirm that as a result of our domestic tax system no tax of any kind will fall on a work of art brought in from abroad for sale in London, and that the person who brings that work of art in will be able to enjoy the full proceeds of the sale as he does now, without let or hindrance.
§ Mr. SheldonWill the Financial Secretary say something about auction sales? He did not go into this in detail yesterday. If he is able to say a few words about it it would ease the minds of a number of people, because it is an important area within the whole problem.
§ Mr. HigginsI do not wish on this Amendment to be drawn into broader questions which my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) has referred to and which I commented on in some detail yesterday, not least because the matter is not yet finalised, though we have every hope that there will be no difficulty in carrying a successful scheme into operation.
1655 The hon. Member for Ashton-under-Lyne (Mr. Sheldon) asked about auctions. He will recall that at the end of my speech yesterday my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) intervened and asked about the position of auctions within the context of the whole scheme. I had anticipated his intervention and I used a precise form of words in response in regard to the relationship between——
§ Mr. Joel BarnettWas it planted?
§ Mr. HigginsIt was not planted. I thought it might come up and the fairly precise form of words which I used will be found embodied in my reply yesterday. I do not have that same precise form of words in front of me now. I hesitate to try to recapitulate it off the top of my head, because it was concerned with the effect which would arise in relation to a dealer being taxed on his margin at an auction. I refer the hon. Member to that answer and I hesitate to traverse that technical ground for the reasons I have explained.
§ Amendment agreed to.
§
Further Amendment made: No. 183, in page 11, line 20, at end insert:
vision for reducing the tax chargeable on the
§ 7.15 p.m.
§ Mr. Joel BarnettI beg to move Amendment No. 98, in page 11, line 23, at end insert:
'(4) Provided that the Commissioners shall ensure that no goods will be subjected to double taxation'
§ Mr. Deputy Speaker (Mr. E. L. Mallalieu)It will be convenient at the same time to take Amendment No.99, in page 11, line 23, at end insert:
'(4) Provided that the Commissioners shall make special arrangements to ensure that second-hand goods for which an invoice is available to prove that value-added tax has been paid shall only be subject to tax in respect of the further value added'.
§ Mr. BarnettAmendment No. 98 deals quite specifically with double taxation and seeks to put into the Clause the fact that goods should not be subjected to double taxation. I know that is a principle which the Financial Secretary is not happy with. Amendment No. 99 deals with the problem of second-hand goods and the fact that they should not be taxed again. We have dealt with one aspect of second-hand goods in the case of original works of art, which is an odd way of describing works of art. In the debate in Standing Committee we were told that consultations were proceeding with the trade about second-hand cars and it would be interesting to the trade—if not exactly the people who are being consulted, then those who are not being consulted—to know just what is going on and how most dealers will be taxed on the margin.
Many hon. Members are concerned about the double taxation which would be involved in the case of stocks during the transitional period. The Co-operative Society is very concerned. I have said on many occasions that the Government have chosen completely the wrong scheme for stocks during the transitional period. On the large items of consumer goods they have agreed on a sale or return basis which will work very well. But there is a large number of other goods which are not to be treated in that way and for those there will be a short tax-free holiday.
If the tax-free holiday was long enough to cover, in the case of any given trade, the length of time in which stocks are turned over that would be fine. But we are told in practice that the tax-free holiday will be very brief. Inevitably that will mean that many retailers will be left with a large volume of tax-paid stocks. I have spoken to many retailers about this. Many of them were not aware of the problem. They thought that VAT did not affect them and when they heard about the problem we are dealing with here 1657 their reaction was to say that they would ensure that their stocks next March would be as low as possible.
Therefore, inevitably orders from retailers to wholesalers to manufacturers from now on will be considerably reduced. I think this will have a disastrous effect economically and therefore I urge the Government to consider the other schemes that I and others have suggested even at this late stage for dealing with the transitional problem of double taxation on stocks. If they do not there could be serious economic consequences.
§ Mr. Alexander W. Lyon (York)My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) has put his finger on a very real problem which certainly affects the major confectionary interests in my constituency and about which those interests have expressed very grave concern. They have made representations through their alliance to the Treasury. May we be given some indication of the nature of the tax holiday? If it is shorter than a month, the period suggested, it would be almost disastrous for the confectionery world and it would have particular effects, coming as it does at about the time of the Easter trade.
It is essential for the confectionery industry to begin planning for the Easter trade at about this time of the year, to begin manufacturing before Christmas and to send goods out for storage about next January. If those goods are sold with purchase tax and are put on the market after the introduction of VAT there is bound to be double taxation. There are two ways of avoiding that situation. The first is to pass on the double taxation in higher prices. That would have a serious effect upon sales and would have some effect upon the cost of living, which I am sure the Chancellor is anxious to avoid. The other way is to de-stock and then wait until the tax comes in before ordering again. That would have a calamitous effect upon the employment prospects of people in my constituency.
I am seriously concerned that at the present moment the industry has been given no assurance to enable it to deal with the problem. It is essential that it should know at an early stage whether it will be given a long period during 1658 which the stocking up can go on or whether it must take alternative measures. One measure which has been suggested, and which I commend to the Financial Secretary, is that for those goods which by their nature will be sold after the introduction of VAT, such as Easter eggs, the invoices could be made out to that effect and used by the Customs and Excise as a test of the starting date for VAT, and that the goods should not carry purchase tax upon the original invoice but should carry VAT at the appropriate time of sale. That suggestion has been discussed to some extent under Clause 7, but it would be useful if the hon. Gentleman would say something about it at this stage.
§ Mr. Alfred Morris (Manchester, Wythenshawe)I hope it may be said that, having regard to the importance of the subject, my intervention in this debate was one of spectacular brevity.
This is one of the few opportunities we have had so far to discuss the very serious threat of double taxation. The House will agree that both in principle and in practice it is wrong that traders should be faced with the possibility of double taxation. Together with the noble Lord, Lord Redmayne, Mr. Butler and Mr. Wood of the Retail Consortium, I recently met the Financial Secretary to discuss the fears of retail traders in this regard. It has been said that there is no question of introducing stock rebate schemes, because the Chancellor has rejected that. Therefore, let it be clearly understood that sale or return schemes are not stock rebate schemes. This was argued as recently as yesterday at the Treasury, again by representatives of the Retail Consortium. Their arguments were utterly compelling, and I have seen no reply that comes anywhere near refutting them.
I am certain that the Financial Secretary fully appreciates the concern throughout the retail trade about the threat of double taxation. The trade has a turnover of more than £15,000 million a year, and employs 2 million people in Britain. I know that the hon. Gentleman appreciates the seriousness of the point I am raising. He was extremely courteous to the hon. Member for Hampstead (Mr. Geoffrey Finsberg) and to me and the representatives of the Retail Consortium 1659 when we saw him. I hope that before the Report stage is completed he will be as constructive as he was courteous then.
§ Sir Robin Turton (Thirsk and Malton)I very much agree with what the hon. Member for York (Mr. Alexander W. Lyon) said about Easter eggs, and commend his suggestion that where the difficulty can be overcome by dated invoices, as with Easter eggs, this should be done. But the problem is much wider. I am particularly concerned with the clothing trade. In my constituency I have the offices of one of the largest manufacturers of clothing. The turnover in goods in that trade is on a three-monthly basis. The British Mantle Manufacturers Association, which is concerned about the matter, is recommending an arrangement for its members on a three-monthly basis.
I hope that when my hon. Friend the Financial Secretary replies to the debate, he will give us rather more hope than we have had in previous exchanges on the matter. It is a very serious problem. In the early part of next year there might well be a great slack in the retail trade, with damage to the economy, because of retailers' failing to stock up owing to the danger of double taxation. I hope that we shall have words of encouragement from my hon. Friend.
§ Mr. HigginsI shall try to answer the various points raised in the debate. I say "various" because it is clear that although the Amendment is drafted in terms of double taxation it covers a number of different problems and concepts. Many of them were touched upon in Committee. We now have a fairly general agreement that the expression "double taxation" can mean a number of different things. I have expressed my view on both the principle and practice of the question on a number of occasions.
I should like to refer first to the case of the VAT and revenue duties being charged. That is a special case, the reasons for which are now well-understood.
The other case where it could possibly be argued that there is double taxation is that of second-hand goods. The hon. Member for Heywood and Royton (Mr. Joel Barnett) spoke about the margin schemes. We have already discussed at 1660 considerable length such schemes with regard to works of art and antiques. There are two other areas where we have had representations that we should have similar schemes. One is motor cars and the other is racehorses. I cannot say more at this stage about the representations with regard to a special scheme for racehorses, although I think there are some areas of similarity with the scheme for works of art and antiques.
The scheme being worked out with the trade for second-hand cars is detailed, and would be very difficult to explain briefly now. Summarised very concisely, it effectively involves selling without tax invoices at tax-inclusive prices and keeping a special form of record of purchases and sales. That is based on proposals from the second-hand car trade. I understand that we are now at the point where agreement is being reached on it, and in due course we shall seek to make the proposals known to the House. They will come before the House in the form of an Order, which can then be debated. I hope that what I have said will go some way in meeting the point made by the hon. Member for Heywood and Royton.
The other matters which have been raised are all related to the question of purchase tax-paid stocks. I am in some difficulty here, because there is a later Amendment on this point, and I am a little uncertain as to how far the House would like me to go now and how far it would like me to go later. Perhaps I may summarise the position in the way in which it has been directly raised by hon. Members, and it may be appropriate to say a little more later.
The hon. Member for York (Mr. Alexander W. Lyon) raised the question in regard to purchase tax-paid stocks of Easter eggs, and it has been raised before. I was reasonably familiar with the problem then, and I am even more familiar with it now, because we have had discussions with the trade. There are some very real dilemmas here. There is a considerable variation of opinion between those who say that they want to be told the length of time and the date as soon as possible and those who say they want to be told the length of time and the date as late as possible.
There are good reasons why one view or the other could be taken, but whether 1661 they always reflect the merits of a particular industry depend on the extent to which people have thought the matter through. We are giving deep thought to it. The length of time is crucial, because it is a question of providing a transitional period—I prefer that expression to "tax holiday"—within which purchase tax-paid stocks may be run down and stocks on which purchase tax has not been paid can be built up. But it is a fine judgment, and my right hon. Friend will give careful consideration to it.
7.30 p.m.
The other problem is that we are most anxious to avoid disruption of trade, but my right hon. Friend will need to take into account the economic situation as it seems to be developing in the period before the transition.
§ Mr. Joel BarnettThe hon. Gentleman says that he does not want to see a disruption of trade and he has spoken about the length of the tax-free period, or transitional period. There is a very considerable difference between trades. In the confectionery business, what is considered to be a long period is very different from that in a trade which turns over its stock, say, only twice or in some cases only once a year, such as ironmongers and pharmaceutical chemists' shops. Is the hon. Gentleman considering having different tax-free periods for different types of goods?
§ Mr. David Mitchell (Basingstoke)To add to the list given by the hon. Gentleman, may I point out that, although some trades turn over their goods in 12 months, the fine wine trade turns over its goods once in five years? I realise that my hon. Friend the Minister cannot do much about that, but it is a problem.
§ Mr. HigginsI note my hon. Friend's point and I am aware of his views on this fascinating topic. To reply to the hon. Member for Heywood and Royton, we are well aware of the different periods of stock holding which exist in trade and industry. I do not know that the representations made to us about what the period may be in a particular trade coincide precisely with such independent information as we have on this topic.
We have made it clear that we believe that there must be a single period, and I do not think it is possible to contem- 1662 plate periods of different lengths. It is well known that there is no perfect solution to this problem. We gave immense thought to it before the Bill was introduced. My right hon. Friend thought that the right approach was to adopt the idea of a transitional period combined with arrangements in certain circumstances for sale or return. If the period is too short or too long, there will be a disruption of trade, and we are anxious to avoid that if we can.
§ Mr. CarterThe Minister mentioned the conflict of view among those in the confectionery industry about when they should be notified as to how long the tax holiday period would be. Can he say precisely who is now telling him that the holiday date should be announced at the latest possible moment? I understand from the Confectionery Alliance, and particularly from Cadburys, in my constituency, that there is unanimity of view in the industry that they want to know at the earliest possible moment how long the period will be. Who is telling the hon. Gentleman that it should be put off to the latest possible date?
§ Mr. HigginsThe hon. Gentleman misunderstands me. I was taking a broader view than the view he is taking. I was not saying that there was any difference of view in the representations from the confectionery industry. I am not able to guarantee that it is unanimous. But I accept broadly that the view expressed by the trade is that which the hon. Gentleman has just summarised. Some trades are not unanimous in feeling that they want the announcement to be made as soon as possible. We are giving careful consideration to this matter and we are continuing discussions with the trade interests.
The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) referred to the representations which we have had from the retail consortium. There are two points here—the question of the length of the transitional period if it applies, and the question of sale or return arrangements. It would be appropriate for me to say something about the second item—I have already dealt with the first—but it would be more appropriate to do so when we reach the Amendment on the question of tax paid stocks rather than on this Amendment, which deals with a 1663 more general question. I take it that this Amendment is what the hon. Member for Heywood and Royton would normally call a probing Amendment and that he wishes to have further clarification of the Government's position. I hope that I have clarified it. We are still engaged in consultations to ensure that, as far as possible, we make the transition from purchase tax and SET to VAT as smooth as possible.
§ Mr. Joel BarnettI am obliged to the hon. Gentleman for the information which he has given about the way in which the tax will work in respect of second-hand cars. However, he will not be surprised to hear that I found his answer on the question of the double taxation of stocks entirely unsatisfactory, because he has chosen the wrong scheme. If he chooses a single short period, inevitably there will be a disruption of trade, which he says he wants to avoid, and double taxation. While it would be as well to deal with the main subject of stocks on the later Amendment, I find his reply on this Amendment entirely unsatisfactory.
§ Mr. Alfred MorrisI understand what the Financial Secretary said about deferring the main debate, but I hope that when he speaks again he will speak constructively on the points which I have raised.
§ Amendment negatived.