Value Added Tax

HC Deb 23 January 1973 vol 849 cc201-7

7. Mr. Dalyell

asked the Chancellor of the Exchequer if he will make a statement on his discussions with the retailing organisations on the value added tax.

Mr. Barber

We have had a number of discussions with retailers about the abolition of purchase tax and SET and the introduction of VAT. The retailing organisations have been most co-operative and helpful, and I am grateful to them. I look forward to these discussions continuing.

Mr. Dalyell

As it is now seven months since a row on both sides of the House led the Government to set up the Munro Committee to deal with the tax on children's shoes, why has no decision yet been arrived at? Surely this is not the most complicated subject in the world.

Mr. Barber

It may not be a complicated subject but I can assure the hon. Gentleman that Mrs. Munro's excellent report is a full and comprehensive one. In these circumstances it is necessary that it should be most carefully considered by my right hon. Friends and myself. We are doing that.

Mr. Joel Barnett

Will the right hon. Gentleman reverse his outrageous decision to penalise in particular small retailers who have not registered for VAT by 31st March, through no fault of their own but because of the extreme complications of the tax, and thus allow them credit for purchase tax on stocks?

Mr. Barber

I am surprised that the hon. Gentleman, in view of his professional qualifications, should say that mere registration is a difficult or complex matter. This is not so. The fact is, and it is as well that those concerned appreciate this, that it is in the interests of people to register as soon as possible because of this rebate of purchase tax.

Mrs. Kellett-Bowman

Will my rigor hon. Friend accept that what the public want is the right answer on VAT and children's shoes, and not necessarily a speedy one as the Opposition seem to want?

Mr. Barber

It was as a result of the responsible attitude adopted by some of my hon. Friends who felt strongly about this matter that the Munro Committee was set up.

14. Mr. Duffy

asked the Chancellor of the Exchequer what progress he has made with explanations to, and registrations of, retailing organisations for value added tax.

Mr. Higgins

Retailers registered for VAT are being visited and advised by Customs and Excise officers, who have already addressed over 7,200 meetings representing all sectors of trade, including retailers. Explanatory notices have been issued. A special leaflet for small retailers has been issued and another will be issued this month.

More than one-third of the estimated number of retailers required to register had been registered by 15th January.

Mr. Duffy

Is the Minister aware that everything points to the vital registration process falling seriously behind schedule because, as he has just reminded the House, only half a million businesses have so far registered whereas it was intended to register 1½ million by the end of next month? How, therefore, will he avoid serious administrative problems?

Mr. Higgins

I do not accept what the hon. Gentleman says. At the same time I would not wish to be complacent. It is important to remember that there are not only the number which have actually been registered—the figure I quoted a moment ago—but also those applications which are now being processed at the VAT headquarters in Southend and a substantial number of applications in local VAT offices. None the less I emphasise, as my right hon. Friend said a moment ago, that unregistered traders will still be liable for the output tax when it comes into operation and will not be able to claim back input tax or the purchase tax rebate. Therefore, it is in the traders' own interest to register as rapidly as possible.

Dr. Stuttaford

Does my hon. Friend agree that shoe retailers will not know how they are placed until they know about the application of VAT to children's shoes? Will he confirm or deny that the Munro Report has now been with the Treasury for many weeks?

Mr. Higgins

My right hon. Friend has dealt with that and, as he has said, he will deal with the question in his I3udget Statement.

15. Mr. R. C. Mitchell

asked the Chancellor of the Exchequer whether the payment of fees by retailers to organisations advising them on the complexities of value added tax are allowed as a tax deductible expense.

Mr. Higgins

Expenditure on advice on the operation of VAT would normally be allowed as a deduction in computing profits for income tax or corporation tax purposes.

Mr. Mitchell

Is the Minister aware that, since it has become known how complex VAT is, large numbers of individuals and organisations have set themselves up as VAT consultants? Does he agree that this is probably the only growth industry we have seen under the present Government?

Mr. Higgins

No, I would not agree with that for one moment. I suggest that individual retailers or others with particular problems should consult their local VAT office, which will be pleased to help them.

19. Mr. Walter Johnson

asked the Chancellor of the Exchequer if he will now say that he will zero-rate value added tax on children's clothes and footwear.

Mr. Higgins

I cannot anticipate my right hon. Friend's Budget Statement.

Mr. Johnson

Does not the Minister realise that the imposition of VAT on essentials such as children's clothing and footwear will bear most heavily on poorer families? How does this line up with the Prime Minister's recent statement on the pay and prices legislation that he wants to protect the lower paid? Come off it! Let us have zero-rating on children's footwear and clothing.

Mr. Higgins

This matter was debated at considerable length in the Finance Bill debates last year. Again, as I am sure the hon. Gentleman will appreciate, I cannot anticipate my right hon. Friend's Budget Statement.

Mrs. Kellett-Bowman

Since the exemption of child-size clothes as opposed to children's clothes would give an unfair bonus to small-size adults whereas it would in no way help the parents of large-size children, will my hon. Friend consider instead assisting parents by means of tax or other allowances?

Mr. Higgins

I have taken note of what my hon. Friend says, as no doubt has my right hon. Friend.

Mr. Dalyell

For how many weeks has the Munro Report been with the Treasury?

Mr. Higgins

I am afraid I do not have that information.

23. Mr. Costain

asked the Chancellor of the Exchequer what would be the estimated value added tax loss to the Treasury in a full year on the basis that the items listed in the Finance Act 1972, Schedule 5, Group 1 (Exemption from VAT for certain interests in land) were zero-rated instead of exempted.

Mr. Higgins

Probably over £50 million.

Mr. Costain

Will my hon. Friend consider how much easier administration would be if the items on this list were zero-rated?

Mr. Higgins

Be that as it may, the figure I have just quoted is one which we need to consider very carefully.

26. Mr. Joel Barnett

asked the Chancellor of the Exchequer if he will reconsider his decision not to postpone the introduction of value added tax, in view of the number of traders who have failed to register.

Mr. Higgins

No, Sir.

Mr. Barnett

Will the hon. Gentleman reconsider that answer in view of the fact that so far, only 336,000 traders have registered out of a total of 1,500,000, and bearing in mind the points which have been made about the state of the Civil Service, particularly the Customs and Excise officials, and the certainty—which must flow from those figures and other information available to the Treasury—that traders are not ready to cope with this enormously complicated task? Does not the hon. Gentleman appreciate that many people believe that the Chancellor of the Exchequer has taken leave of his senses in introducing a tax of this kind at a time when he is putting forward totalitarian measures of a kind which have never before been used in this country? Does he not agree that it is outrageous to introduce such a tax at the same time as he seeks to introduce wage controls?

Mr. Higgins

I do not for a moment accept the hon. Gentleman's remarks. As for the conjuncture of the introduction of value added tax and the Government's prices and incomes policy, he will be aware that in the Government's White Paper we propose specific measures for the introduction of VAT. I am a little surprised that the hon. Gentleman has again raised the general question. When we debated the subject very fully before Christmas on a Supply Day, the Opposition had so little enthusiasm for their own motion that they could not muster enough Members to keep the debate going.

Mr. Ridley

Does my hon. Friend agree that to postpone the introduction of VAT for the simple reason that traders have not bothered to register would give traders a weapon for all time in that they could put off a tax by the simple process of refusing to register? If the rule of law means anything, will my hon. Friend firmly tell the House that he has no intention of postponing the introduction of VAT?

Mr. Higgins

I have made absolutely clear, as has my right hon. Friend the Chancellor of the Exchequer, that we have no intention of delaying the introduction of VAT or of delaying the abolition of SET and purchase tax. I do not accept the remarks of the hon. Member for Heywood and Royton (Mr. Joel Barnett) about registration, but at the same time we are not complacent about the situation. We believe that it is in everybody's interest that traders should register as soon as possible, given the fact that unregistered traders cannot deduct input tax. They will still be liable for output tax and they will not be able to take advantage of the purchase tax scheme if entitled to it.

27. Mr. Gorst

asked the Chancellor of the Exchequer whether, in every instance in which value added tax is levied, it will be possible for the person providing a product or service to pass on the tax to the consumer; if not, what estimate his Department has made of the proportion of the tax that will be levied in this way; which industries are likely to be so affected; and if he will make a statement.

Mr. Higgins

Such information is not available.

Mr. Gorst

Will my hon. Friend undertake to reconsider the position of traders and those who supply a coin-operated service who are unable to pass on the tax to the consumer? Since this tax is expected to be paid by the consumer, will my hon. Friend give an undertaking that this matter will be reconsidered?

Mr. Higgins

I am afraid I cannot give an undertaking of that kind. I fully appreciate my hon. Friend's concern on this topic which he has raised on a number of occasions. The difficulty in regard to coin-operated machines arises on the question of discontinuity in terms of the large size of coin unit in which the amount is paid. None the less the introduction of VAT and the abolition of SET and purchase tax is a change in costs, and the industry has coped with similar changes in costs where precisely the same problems have arisen. I believe that it will succeed in coping in this instance.

Mr. Brian Walden

Has the Treasury now provided an answer to the coin slot problem better than the one we had in Committee concerning launderettes—namely, that people should buy a season ticket?

Mr. Higgins

That was one of the points raised in Committee and I am well aware of the hon. Gentleman's continuing interest in this subject. Whenever there are changes in costs, there are always problems for the operators of coin-operated vending machines and other coin-operated machines. I do not regard this as a unique problem connected with the introduction of VAT and the abolition of SET and purchase tax, and I do not believe that this will necessarily create any more problems than any other changes in costs, which have been experienced by the industry.

Mr. Gorst

In view of the unsatisfactory nature of the reply, I give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.