VALUE ADDED TAX

HC Deb 01 March 1973 vol 851 cc1695-8

Q1. Sir Gilbert Longden

asked the Prime Minister if he is satisfied with the co-ordination between the Treasury and the Department of Trade and Industry in the matters of explaining the operation of value added tax, especially upon small businesses.

The Secretary of State for the Home Department (Mr. Robert Carr)

I have been asked to reply.

Yes, Sir. A Customs and Excise liaison officer has been appointed to maintain close contact with the small firms division of the Department of Trade and Industry, as recommended by the Bolton Committee on Small Firms. The Departments are co-operating in a major effort to reach small firms with the facts about the operation of value added tax.

Sir Gilbert Longden

Does not much alarmist criticism alleging the inflationary effects of the new tax invariably conceal the fact that price reductions must result from the simultaneous abolition of purchase tax and SET? Does not my right hon. Friend agree that much remains to be done to explain the operation of VAT, especially to people who cannot afford to take professional advice?

Mr. Carr

I agree with my hon. Friend on all those points. Certainly, there is alarmist criticism. There must be some price reductions resulting from VAT replacing purchase tax and SET. There is machinery to try to make sure that those reductions take place. I agree that, as is perhaps inevitable, there is still some lack of knowledge and understanding. My right hon. Friend the Chancellor of the Exchequer will be arranging for a major public information campaign after his Budget next week, and Customs and Excise officers will step up their activities during the remaining period.

Mr. Grimond

Is the acting Prime Minister aware that the imposition of VAT, coupled with the returns required under the Government's prices and incomes policy, is placing an intolerable burden on the small shopkeeper and the small business, which makes the Labour Party look like the party of free enterprise and laissez-faire?

Mr. Carr

I am glad, for the well-being of the country, that I am not acting Prime Minister.

Of course, the introduction of a new tax of this kind causes difficulty. It would be foolish to deny that. But I believe, the Government believe, and I should have thought that the right hon. Gentleman in particular would also believe that it is, on balance, a better form of indirect taxation than those it replaces, and that it will turn out to be so in practice.

Mr. Haselhurst

Is my right hon. Friend aware that some of the meetings arranged to explain the tax and its operation to small businessmen have not had the greatest regard to their needs, in terms of geography and timing? May that matter be looked into?

Mr. Carr

Yes, indeed. I shall look into it. We all have our own local experiences. I have been impressed, from talking to small shopkeepers in my constituency, by the number of meetings that have been available for them to attend. Customs and Excise officers have already addressed about 7,500 meetings throughout the country, so the meetings have been pretty widespread.

Mr. Frank Allaun

Will the Government take action over firms that are exploiting in advance the advent of VAT? For example, will they take action over the large advertisement for kitchen units that I am now holding, which states: All the above units will go up by the full 10 per cent. on 1st April"? Nobody knows. Should not the Government do something about that kind of dishonest advertising?

Mr. Carr

Perhaps the hon. Gentleman and other hon. Members will draw the attention of my right hon. and learned Friend the Minister for Trade and Consumer Affairs to specific cases. I am sure that he will deal with them very actively. There are specific powers in the Counter-Inflation Bill to enable price reductions to be ordered wherever it is proved that proper allowance has not been made for the abolition of the other two taxes and their replacement by the new one.

Q5. Mr. Carter

asked the Prime Minister if he is satisfied with co-ordination between the Government Departments involved in the introduction of value added tax.

Mr. R. Carr

I have been asked to reply.

No, Sir—I am sorry—Yes, Sir.

Mr. Carter

If in the lifetime of the Government the European Economic Community seeks to harmonise rates of value added tax throughout the Community and to extend its coverage to food, will the Home Secretary, on behalf of the Government, assure the House and the country that the Government will use their veto to prevent such a move?

Mr. Carr

In spite of my immediate demonstration of open-mindedness, I am afraid that I cannot be drawn on a hypothetical question of that nature.

Mr. Healey

Will the Minister tell the House whether, in fixing the appropriate rate for prices after the introduction of VAT, the Department of Trade and Industry will insist on retailers maintaining a constant percentage margin rather than a constant cash margin? The Minister will be aware that this will make all the difference in the final relationship between VAT prices and pre-VAT prices?

Mr. Carr

That is an important point, which I shall draw to the attention of my right hon. Friend the Chancellor of the Exchequer, because it is not in my field. We have taken powers, in the Counter-Inflation Bill now before Parliament, to deal with this. We have also taken powers to extend the standstill until 29th April, to make easier the isolation of the examination and control of the effects of the introduction of VAT.

Mr. Healey

With respect, the whole impact of VAT on the retail price index and the cost of living will depend on the Government's decision. Is the Prime Minister's deputy not in a position to give the House any decision on this matter a few weeks before the tax comes into effect?

Mr. Carr

With my right hon. Friend the Chancellor of the Exchequer about to introduce his Budget on Tuesday, in which he will have a great deal to say about VAT, I am well within the normal traditions in not being drawn in detail on this point.

Mr. Kilfedder

Is my right hon. Friend not in agreement with the case that I have been putting, that there are serious anomalies in VAT? The Government are anxious to see as many houses built as possible, but is not my right hon. Friend aware that a person building a house for himself has to pay VAT on the materials whereas a person building a house for sale does not?

Mr. Carr

There may well be some anomalies associated with VAT, as there are with any form of taxation that has ever been devised. I am sure that there are fewer anomalies associated with VAT than there are either with purchase tax or selective employment tax, which it replaces.