HC Deb 27 April 1978 vol 948 cc1621-3
5. Mr. Clemitson

asked the Chancellor of the Exchequer what proportion of total revenue is raised by indirect taxation in each of the member countries of the European Economic Community.

Mr. Robert Sheldon

With permission, I will arrange to have the information printed in the Official Report.

Mr. Clemitson

Is it not true that the standard rate of VAT, for example, is almost twice as high in the other member countries of the EEC as it is here and that in France, for example, VAT is charged on food, passenger transport and fuel? Therefore, is not the logic of the argument for a shift from direct to indirect taxation that either the rates at which indirect taxation are charged rise, which is inflationary, or that the net is spread ever wider to cover more and more essential goods and services, which is regressive, or a combination of the two?

Mr. Sheldon

My hon. Friend is right in drawing attention to the considerable variations in the incidence of the value added tax in many other countries. There is a very wide range indeed. But I point out that the amount of indirect taxes collected in Denmark, Luxembourg and the Netherlands is less than ours therefore, we are not so much out of line with what applies in many other Community countries. As for the regressive incidence of the indirect taxes, it is not as much as it used to be.

Mrs. Kellett-Bowman

Is the right hon. Gentleman aware that the working man with two children in this country on average wages pays more in direct tax than any other comparable worker in the Community? As the right hon. Gentleman has also told us of three Community countries in which indirect taxes are lower than in this country, is he proud of the burden of taxation on our working people?

Mr. Sheldon

The consequence of low indirect taxation is relatively high direct taxation, because those are the two elements in total taxation. My right hon. Friend the Chancellor of the Exchequer has accepted that there should be a move from direct to indirect taxation in the way that he has announced. As for the total burden, this has to be taken into account with the changes that were made in the Budget, which amount to a reduction in taxation generally.

Mr. Stoddart

Will my right hon. Friend confirm that Britain's net contribution to the EEC for the current financial year will be £750 million, which is equivalent to 2p off income tax? That is the measure of the contribution that this country makes to Europe through direct taxation.

Mr. Sheldon

I am aware of my hon. Friend's continual concern with the problems of the Community, but this is a matter for another Question, and I urge him to seek his reply there.

Mr. Peter Rees

I was happy to note that the Financial Secretary repeated the statement of the Chief Secretary that VAT is not nearly as regressive as had been thought. In view of that statement, and the statement of the Chancellor of the Exchequer, which he repeated, that there will have to be a shift from direct to indirect taxation, when can we expect that shift to take place?

Mr. Sheldon

The hon. and learned Gentleman will have to wait for developments in the economic situation.

Following is the information:

The proportion of total revenue raised by indirect taxation in each member country of the EEC in 1975, the latest year for which data is available, was as follows:

United Kingdom 46.8 per cent.
Belgium 48.3 per cent.
Denmark 40.0 per cent.
France 66.9 per cent.
Germany 47.9 per cent.
Ireland 63.0 per cent.
Italy 69.1 per cent.
Luxembourg 41.0 per cent.
Netherlands 43.4 per cent.

Total revenue has been taken to include all national insurance contributions. Indirect taxation comprises central Government taxes on expenditure, payroll taxes, employers' national insurance contributions and local authority rates.

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