Value Added Tax

HC Deb 10 May 1972 vol 836 cc1298-9

16. Mr. Charles R. Morris

asked the Minister of Posts and Telecommunications whether he will make a statement indicating what estimates he has made of the effect which the introduction of the value added tax will have on the finances of the Post Office Corporation.

Sir J. Eden

Telephone charges would attract the standard rate of tax but any effect on the finances of the postal business and hence on postal charges would be marginal.

Mr. Morris

Can the Minister confirm the estimate that value added tax will impose a financial burden of £40 million on the Post Office telephone service and that this financial albatross, which will add about 10 per cent. to every telephone subscriber's account, is an imposition?

Sir J. Eden

No. I confirm the hon. Gentleman's figures to the extent that private telephone users will pay an additional 10 per cent. But the impact on the finances of the corporation as a whole will be marginal.

Mr. Arthur Lewis

Can the right hon. Gentleman confirm that this is yet a further "benefit" which we shall get from going into the Common Market?

Sir J. Eden

No, because, as the hon. Gentleman well knows, the decision about the introduction of value added tax would have been taken whether or not we were moving towards the Common Market; it will of course replace other taxes already in existence.

Mr. Gregor Mackenzie

We hoped that by now the right hon. Gentleman would have been able to make a very precise estimate of the increase in telephone charges resulting from value added tax. By how much would the CBI figure of 5 per cent. be exceeded if one lumped together the recent possible increase in charges and the charges we have heard about today?

Sir J. Eden

I am sorry I cannot answer that question now. If I have the information available, I will answer it. As the hon. Gentleman knows, however, most of these detailed matters about the tax depend on the way in which it is to be put into effect, and decisions on that have not yet been taken.

27. Mr. Golding

asked the Minister of Posts and Telecommunications what is his estimate of the effect on telephone calling rates of the imposition of value added tax.

Sir J. Eden

Detailed forecasts of this nature are a matter for the Post Office, which tells me that it does not expect VAT to be particularly significant among the many factors which affect calling rates.

Mr. Golding

Is the Minister aware that, on his own admission, value added tax will increase the costs to the residential subscriber by at least 10 per cent.? Is the Minister not aware that the cost of making telephone calls is a matter of some concern to those with an interest in the Post Office? Is the right hon. Gentleman not further aware that one of the great difficulties which the Post Office faces is the low calling rate by residential subscribers in this country?

Sir J. Eden

I do not believe that this will have any direct effect in itself on the calling rate, and I think that we shall see that in practice.

Sir G. Nabarro

Will my right hon. Friend consider whether all postal and telecommunications services should officially and statutorily be designated zero-rated, thereby removing all possibility in any circumstances of their attracting value added tax?

Sir J. Eden

I think that exemption, which allows rebating, will be found to be less onerous than zero-rating to the Post Office as a whole.

Mr. Gregor Mackenzie

The right hon. Gentleman must be aware that this is bound to have an adverse effect on the calling rate. He has promised, as have the officials of the Post Office, to do everything possible to increase the calling rate. If there is to be a minimum increase of 10 per cent. plus the 3½ per cent. that is under consideration, the effect on the calling rate will be serious.

Sir J. Eden

No, Sir, I do not believe that that will be the case.