Value Added Tax

HC Deb 27 March 1975 vol 889 cc678-80

8. Mr. Jim Marshall

asked the Chancellor of the Exchequer what consideration has been given to relieving the operation of fixed coin weighing machines of value added tax.

Dr. Gilbert

This question has been fully considered as a result of previous representations by my hon. Friend, but for the reasons I have outlined to him in correspondence I regret that his proposal cannot be accepted.

Mr. Marshall

Is my hon. Friend not prepared to reconsider that decision? I believe he is aware that I have written to him on this subject in the past. Is he further aware that these firms are being asked to pay a tax in respect of the consumer but which they find impossible to levy on the consumer? Is he further aware that as a consequence they have to pay 8 per cent. of their gross income, which has a disastrous effect upon their net profit? Will my hen. Friend reconsider the urgent need for zero rating these firms?

Dr. Gilbert

I am aware of the difficulties that my hon. Friend has put forward. He will be aware that anomalies are confined to machines like launderettes and weighing machines. With vending machines that sell confectionery it is possible for the amount sold to be adjusted to take account of the tax. I am sorry to have to say that, having looked at this question closely, as did the previous administration, we have found that it is not practicable to select one type of vending machine for zero rating.

Mr. MacFarquhar

Has my hon. Friend received any request from small businesses in other industries for permission to delay VAT payments to help them with their cash flow problems? Will he at least permit Her Majesty's Customs and Excise to talk to such firms to see whether there is any possibility of such a delay?

Dr. Gilbert

Offhand I am not aware of any recent representations to that effect. One of the features of VAT is that it improves the cash flow of many firms, because they receive the input tax deduction before they have to account to Customs and Excise for the output tax.

11. Mr. Moate

asked the Chancellor of the Exchequer how many letters he has received opposing the introduction of additional rates of VAT.

Dr. Gilbert

My right hon. Friend has received about 1,200 such letters, of which approximately 900 come from retail pharmacists. Other letters expressing similar views have been received by Her Majesty's Customs and Excise, which has informed Ministers of the views that they have expressed.

Mr. Moate

Are the Government aware of the widespread feeling that the present system for the collection of VAT and many of the VAT returns imposes an extra burden, particularly on small and medium-sized businesses? Is he aware that it would be intolerable to complicate the system further by introducing multi-rate VAT?

Dr. Gilbert

We are aware of the problems that VAT has entailed for the small business man. Customs and Excise has recently introduced a whole array of further simplified schemes after prolonged discussions with various trade associations aimed at helping such businesses as best it can.

Mr. Spearing

Does my hon. Friend agree that it is not only a question of increasing additional rates of VAT but of keeping within the power of this House the imposition of VAT rates on articles now exempted, such as food, travel and fuel? Will he tell the House why his Department and the Departments of some of his hon. Friends insist that, despite the economic convergence assumed if we stay in the Community, we need not put VAT on any of these things which are exempt or zero-rated at the moment?

Dr. Gilbert

We have always made it clear that in no circumstances would we agree to a harmonisation which covered foodstuffs. There is a great variety of rates and structures in the various countries of the Community and it is relatively fruitless now to speculate precisely where harmonisation would end up.

Sir G. Howe

Will the Financial Secretary now answer the question posed by my hon. Friend the Member for Faversham (Mr. Moate)? I put this seriously and in no partisan sense, it being a most important matter. Does the hon. Gentleman recognise that any decision by the Government to introduce a multi-rate VAT system would put a substantial additional burden on many of those who are now responsible for collection, that to move in that direction would be to threaten the entire system of tax collection and would cause grave inconvenience and harm to many small traders, and that the Government ought to reject the idea out of hand here and now.

Dr. Gilbert

Speculation of the sort in which the right hon. and learned Gentleman has just indulged is based on all sorts of assumptions, for which he has no foundation whatever, as to the shape and size of a multi-rate system if one were to be introduced.