§ 1. Mr. David Atkinson
asked the Chancellor of the Exchequer if he is satisfied with the present threshold for value added tax registration liability.
§ The Financial Secretary to the Treasury (Mr. Nigel Lawson)
Yes, Sir. My hon. Friend will be aware that the VAT threshold was raised by 35 per cent. to £13,500 in this year's Budget.
§ Mr. Atkinson
I thank my hon Friend for his reply. Is he aware that, for nearly half a million small business men, the cost of administering and collecting VAT from them is more than the revenue obtained? Will he initiate discussions with our Community colleagues to change the VAT system and end this scandal that employs tax collectors unnecessarily at the expense of free enterprise?
§ Mr. Lawson
My hon. Friend will be aware that, under the sixth directive of the European Communities, the limit cannot be increased to an extent beyond that which would maintain its 1973 value in real terms. I do not, therefore, think that there is much chance of our securing a derogation from that. Nor do I wholly accept—although I appreciate the burden on small traders—that the situation is quite as bad as my hon. Friend suggests.
§ Mr. Horam
Is the hon. Gentleman saying that he is bound by what the EEC decides on these matters? Will he not give further consideration to his hon. Friend's point? There is a good case for raising the minimum level for registration to £50,000. Is he aware that that would really help small businesses, rather than 720 the phoney measures that the Government have so far brought out?
§ Mr. Lawson
The hon. Gentleman is well known as a supporter of the EEC. I would point out to him that when the registration limit was last raised in 1978—we have not yet got the statistics for the consequences of the increase in 1980—only about one-fifth of the traders paying tax who were invited to de-register, did so. The position is a little different from what the hon. Gentleman implied.
§ Mr. Emery
Has my hon. Friend considered the possibility of a tranche above the cut-off limit whereby a trader can purchase a licence which will average the revenue that he would have had to pay in the band from £13,500 to £20,000, thereby ensuring that money is paid to the Revenue but making the system much more simple for small business men to operate, without the normal VAT return difficulties?
§ Mr. Lawson
I will be happy to look at my hon. Friend's suggestion. My first impression is that, far from being a simplification, it might add to the complexity of the tax. Our purpose has always been to simplify where possible, rather than to make things more complicated.