§ 9. Mr. Hannamasked the Chancellor of the Exchequer what representations he has received from English language schools for foreign students concerning value added tax; and if he will make a statement.
§ Mr. LawsonA number of representations have been made by English language schools that their tuition services to overseas persons should be zero-rated for value added tax purposes.
The Government are fully aware of the contribution which such schools make to the economy, but I am afraid that special VAT treatment could not be justified in the context of a broadly based tax.
§ Mr. HannamIs my hon. Friend aware that these language schools bring a large amount of invisible exports into Britain—about £60 million a year—and that compared with foreign registered companies operating English language schools in this country, which are zero-rated, they are being discriminated against? Will he reconsider their position and try to make VAT more flexible to help invisible exports?
§ Mr. LawsonThe need is not to make VAT more flexible but to ensure that foreign organisations are not improperly escaping tax. The main issue is where they are established. Information is currently being sought on the exact nature of these bodies' activities in the United Kingdom. If it is discovered that they are supplying their services from establishments in this country, they will be treated for VAT purposes in the same way as United Kingdom-based organisations.
§ Mr. CostainDoes my hon. Friend understand that we are talking about an export? We exempt our exports from VAT. Why should this service not be exempted?
§ Mr. LawsonIt is not technically an export. It is a service that earns foreign exchange, as does the tourist industry. However, that does not mean that VAT is not levied on shops and other places that tourists frequent. My hon. Friend is suggesting a fundamental change in the value added tax system, which I do not think is warranted by this example.