HC Deb 11 July 1974 vol 876 cc1539-41
13. Mr. Blaker

asked the Chancellor of the Exchequer what studies are being made by Her Majesty's Government of the implications of introducing multiple rates of value added tax.

Dr. Gilbert

I would refer the hon. Member to the answer I gave on 12th June to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy).—[Vol. 874, c. 561–2.]

Mr. Blaker

Is the hon. Gentleman aware that the introduction of further rates of VAT would have serious disadvantages? If his right hon. Friend is considering such a move, will the hon. Gentleman resist any suggestion of discrimination against the tourist industry? Is he aware that such a move has been adopted in other countries but has had to be abandoned because of the severe adverse effects?

Dr. Gilbert

I shall take note of the hon. Gentleman's suggestion. I am well aware of his interest in these matters.

Mr. Cryer

Is my hon. Friend aware that millions of people are fed up to the teeth with VAT? They see it as a device for getting us into the Common Market and keeping us there. Will my hon. Friend promise that when we get out of the Common Market we shall get rid of VAT and replace it by purchase tax?

Dr. Gilbert

My hon. Friend will recall that the Conservative Party made clear that it was introducing VAT whether or not we went into the Common Market. I take my hon. Friend's point that the great advantage of purchase tax over VAT is that it makes it easier to discriminate against luxury goods.

Mr. Biffen

Cannot we rely upon the good-natured xenophobia of the Treasury Bench to prevent us from adopting this most unwholesome characteristic of Common Market nations' tax systems—multiple rates of VAT? Surely, one's experience suggests that the single rate plus the zero rate is far preferable to multiple rates?

Dr. Gilbert

I am glad that the hon. Gentleman agrees that there should be a zero rate. That in itself introduces two rates into the VAT system. I cannot accept the general philosophy behind the hon. Gentleman's supplementary question, because the Government think that it is a proper function of the tax system to discriminate between socially desirable and socially less desirable goods and activities.

14. Mr. Robin F. Cook

asked the Chancellor of the Exchequer, in the course of his renegotiation with the EEC, for what items he intends to insist on zero rating in the event of harmonisation of the rate of VAT.

27. Mr. Moate

asked the Chancellor of the Exchequer what is his policy with regard to zero rating and harmonisation of value added tax in relation to the EEC renegotiations.

Dr. Gilbert

The EEC Commission has made no proposals for harmonising the rates of VAT. Its proposals in the draft Sixth Directive on VAT would, if unanimously adopted by the Council of Ministers in their present form, provide for the retention of all zero ratings in force in this country on 1st July 1973, unless and until the Council should in the future unanimously decide to restrict zero ratings or to abolish fiscal frontiers. We shall not accept any harmonisation of VAT which would restrict our discretion to refrain from taxing necessities.

Mr. Cook

I thank my hon. Friend for that full reply. Will he assure the House that, irrespective of the date of 1st July 1973, he will not agree to terms for our continued membership of the Common Market which will mean the removal of zero rating on aids for the disabled and protective clothing, which were exempted in the recent Budget? Will my hon. Friend confirm that continued membership of the Common Market, irrespective of the renegotiated terms, will mean the continued imposition of VAT, with all its inflexibility and its tendency to produce inflation which was so deplored by his right hon. Friend in his Budget Statement?

Dr. Gilbert

My right hon. Friend has no intention whatever of removing the zero rating on aids for the disabled which he so recently introduced.

Mr. Moate

I note that the Government are insisting upon the right to retain zero rating, but does that imply that the Government accept the principle of harmonisation in respect of the scope of VAT, apart from zero rating?

Dr. Gilbert

I draw the hon. Gentleman's attention to the fact that both my right hon. Friend and his predecessor the right hon. Member for Altrincham and Sale (Mr. Barber) have extended zero rating since the Sixth Directive of 1st July 1973.